Help explain home insurance claim: recoverable depreciation

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Joined: Sun Dec 03, 2017 7:28 pm

Help explain home insurance claim: recoverable depreciation

Post by jeff622859 »

I recently had significant home water damage and lost approx $15,000 worth of personal contents. My insurance carrier has paid me half of this but approx $7,000 is under “recoverable depreciation.”

My question involves the Recoverable Depreciation aspect:
For example, my couch has a replacement cost total of $3,000. The insurance carrier has paid me $500 as “actual cash value” and the additional $2,500 is under “recoverable depreciation.”

I asked and the carrier said I need to buy a replacement couch for AT LEAST $3,000 in order to claim the additional $2,500 of “recoverable depreciation.” The carrier said that if I buy a couch for only $2,500 then I cannot claim ANY of my recoverable depreciation. Therefore if buying a $2,500 couch I would be stuck spending $2,000 of my own money out of pocket !!

Is this correct? Do you have to spend AT LEAST the Replacement Cost Total for an item in order to recover ANY of the “recoverable depreciation” for that item?

That sounds crazy. Please advise.

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Joined: Tue Jul 20, 2021 11:16 am

Re: Help explain home insurance claim: recoverable depreciation

Post by Cali4en »

Ultimately the answer for your particular situation is in your policy documents since insurers can and do tweak recoverable depreciation rules in lots of ways.

That being said, recoverable depreciation is usually an "up to $X" kind of thing. So in your case you can buy up to a $3,000 couch, but anything less than that should be fine too, though you won't get back the full amount of recoverable depreciation. You could go over $3,000 too, but you'd be on the hook for anything above and beyond the coverage amount on the original couch.

I suppose an insurer might make it an all-or-nothing proposition to create yet another hurdle to limit payouts, but I suspect it is more likely that the person you spoke to either misunderstood or miscommunicated the issue. I'd double check the relevant potions of your policy and call back to speak with your desk adjuster or a supervisor rather than just a regular policy rep.
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Joined: Sun Jul 26, 2020 7:01 pm

Re: Help explain home insurance claim: recoverable depreciation

Post by 2Scoops »

This sounds odd based on my limited experience. We had a very small water leak in our house last year but ended up needing to replace the hardwood on the the entire 1st floor. This was our 2nd time doing this by the way.... not fun.

The insurance company gave us about 80% of the total value and claimed the other 20% as recoverable depreciation. If we used more than the 80% to have new floors installed they would give us the difference up to 20% as long as we provided the invoices. Thankfully we picked out something that was nicer than what we had before - far more pet friendly, more modern, etc and didn't need the extra 20%.

They definitely didn't specify we had to use the entire amount to get anything above the initial payment.
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