Depreciation and Your Claim
After sustaining business interruption loss from any disaster event such as: fires, wind,hurricanes, tornadoes, flood, water, hail, lightning, equipment breakdown, and theft and vandalism, your insurance company must provide a detailed written estimate of all damages – to the property itself and the contents. This process can be a challenging one for the home or business owner. Public claims adjusters often see home and business owners who are at a loss as to how to navigate this process.
The insurance company’s estimate is usually calculated and written in a software program called Xactimate. Typically, the layout of the damage should be labeled by location of the repair, such as: roof, exterior, interior room by room. It should also list the square footage of such locations. Each of the labeled locations should itemize what repairs are needed by giving the square footage of repair, price per square foot, total cost per item, depreciation amount, and actual cost after depreciation. Replacement cost value (RCV) is the amount it will cost to repair the area using current prices for like kind and quality materials. This is prior to any depreciation or deductibles. Depreciation is based on age. Even if you have replacement coverage most of the time, the insurance company will depreciate the repairs and hold that money until the repairs are completed. Actual cash value (ACV) is the replacement cost value minus depreciation amount.
At this point in the post, you’re probably confused about what deprecation is and what the numbers associated with deprecated repairs mean. In order to help you become a more educated policyholder, Reliable Claims Adjusting has included a short, simple example for you to look over.
Material type: 30 year shingle
Current age: 10 years old of 30 year life span
Replacement cost value: $10,000
Depreciation amount: 33% = $3300
Actual cash value: $6700
If you’re still a little (or a lot) confused about repair cost deprecation, please contact a licensed public insurance adjuster to help with your claim. Reliable Claims Adjusting has years of experience in this process and offers a free property and claim evaluation. Contact us today!