April 18, 2021
What is recoverable depreciation? Depreciation is going to affect just about every homeowner who files a claim for a property damage on his home in Minnesota. What the adjuster does is he arrives at a value for the cost of repairing the portion of your home that’s damaged and then they apply depreciation to that based on the age of either the house or like if it’s roof damage based on the age of the roof.
So for example, if you have what’s considered to be a 30-year shingle on your roof and that was installed 10 years ago, then effectively you have 33% depreciation on your roof. So on a property damage claim what’s going to happen is that depreciation amount is going to be excluded from the initial part of the claim. If you have what’s called replacement cost value coverage on your home, then you get that depreciation amount paid back to you.
If you have actual cash value you don’t get it. So that’s the difference between recoverable depreciation and non recoverable depreciation. So let’s just use some easy numbers just to make this simple, let’s say the gesture says that it’s going to be $10,000 to replace your roof and let’s say you’ve got 40% depreciation that means there’s $4,000 that they’re going to hold back in the claim off of that first check that you get. So $4,000 they’re going to keep out of the payment on the initial check that you get for your claim.
Again, if you’ve got replacement cost value coverage, then when the job is all done and the insurance company receives an invoice showing that $10,000 was charged to replace the roof, then they send you that check for $4,000 you have recovered that depreciation.
So a lot of homeowners will panic when they get their check and it’s only $6,000 and they have to go spend $10,000 to get a roof. But don’t panic because if you have recoverable depreciation then you’re going to get that second check for that depreciation amount.
You’re either going to have recoverable depreciation or you’re going to have non recoverable depreciation and if you have recoverable depreciation that’s going to get sent to you in a second check after an invoice is received, meaning the insurance company receives an invoice for the amount that’s being charged.
So then let’s talk about just one other thing. Let’s say your your claim amount is $10,000 but your roofer is only gonna charge $8,000 to do the roof so you might be thinking oh man that’s great now I can pocket some money. That’s not how it works if the roofer is honest, he’s going to send in an invoice for $8,000 and then you just saved your insurance company $2,000 because they’re not going to give you that $2,000.