What depreciation means on a claim check
Depreciation is the dollar amount an insurance company subtracts from the cost to replace a damaged item new, to reflect age and wear. The replacement cost minus depreciation equals the actual cash value — the amount paid up front on most claims. On a replacement cost policy, the held-back depreciation (called "recoverable depreciation") is released after the homeowner submits proof that the repair or replacement is complete.
Example: a 14-year-old asphalt roof with a 25-year life is damaged. Replacement cost is $18,000. The carrier depreciates it 14/25 (56%), so depreciation is $10,080. The first check is $7,920 (ACV). After the new roof is installed and invoices are submitted, the remaining $10,080 is released, minus the deductible.
Typical useful-life and annual depreciation by item
Insurers use published depreciation schedules. The percentages below are common industry baselines; carriers vary by a few points.
| Item | Useful life (years) | Annual depreciation | Notes |
|---|---|---|---|
| 3-tab asphalt roof | 20 | 5.0% | Higher in hail and UV states |
| Architectural asphalt roof | 25 to 30 | 3.3% to 4.0% | Most common shingle today |
| Metal roof | 40 to 50 | 2.0% to 2.5% | Slower depreciation, longer recovery |
| Tile or slate roof | 50 | 2.0% | Often depreciated only on the broken portion |
| Carpet | 8 to 10 | 10% to 12.5% | Depreciates fast; common dispute area |
| Hardwood floors | 50+ | 2.0% or less | Refinish credit often given instead |
| Interior paint | 5 to 7 | 14% to 20% | Often fully depreciated on older homes |
| HVAC condenser | 15 | 6.7% | Refrigerant changes can accelerate |
| Water heater | 10 to 12 | 8% to 10% | Tankless units often 15+ years |
| Kitchen appliances | 10 to 13 | 7.7% to 10% | Stainless typically depreciated like white |
| Furniture (upholstered) | 10 | 10% | Condition adjustments apply |
| Electronics (TVs, computers) | 5 to 7 | 14% to 20% | Fast obsolescence depreciation |
| Clothing (everyday) | 5 | 20% | Often heavy ACV haircut on contents |
| Vinyl siding | 30 to 40 | 2.5% to 3.3% | Color-match issues can add to claim |
| Fence (wood) | 15 to 20 | 5% to 6.7% | Section vs. full replacement disputes |
Recoverable vs. non-recoverable depreciation
- Recoverable: Released after repair on a replacement cost policy. Most dwelling claims work this way when the homeowner actually rebuilds.
- Non-recoverable: Permanently subtracted. Common on ACV-only policies, on cosmetic-damage roofs, and on personal property with no replacement receipt submitted.
How condition and obsolescence change the number
Carriers can adjust beyond the straight age formula. A roof in poor condition for its age is depreciated more; a well-maintained system in great shape is depreciated less. Discontinued items (matching siding, custom cabinetry) sometimes get a "like kind and quality" credit when an exact replacement is unavailable.
Common depreciation disputes
- Carrier depreciates labor in addition to materials. Several states prohibit labor depreciation; others allow it.
- Roof depreciated by full system age when only the storm-side slope is damaged.
- Contents depreciated using "consumer" tables when the items are commercial-grade.
- Recoverable depreciation never released because the homeowner missed the carrier's repair deadline (usually 180 to 365 days).
How Agents can help
Agents review the depreciation schedule on a claim summary line by line, identify items where the percentage is too aggressive for the actual condition, confirm the policy is replacement cost rather than ACV before a loss, and flag carriers that depreciate labor in states where that practice is restricted. Before the policy is written, Agents quote replacement cost for both dwelling and personal property and disclose any cosmetic-only or ACV-only roof endorsements that would convert depreciation into a permanent loss.