After you successfully accomplish the goal of purchasing a home and covering it with an insurance policy, you’ll be presented with the option to choose replacement cost coverage. This will protect you by providing the funds to replace damaged or stolen property. This is the process of recoverable depreciation, which covers the gap between the depreciated value of an item, and the actual cost to replace it with one that is “fresh out of the box.”

What is the Calculation Process for Recoverable Depreciation?

If the depreciated value of a stolen stereo is $700 while a brand-new model is $1800, the gap of recoverable depreciation is $1100. When you encounter an issue and make an insurance claim, all of us here standing by for you at the Alexander Insurance Agency will calculate the actual cash value of the item that is damaged, missing, or destroyed from peril. If the item was damaged because of an issue that was covered by the policy such as a flood or fire, the company will assign an adjuster to determine what the value of replacement will be.

This provides a close-up look at the deprecation of the item including its age, normal wear and tear, and predicted longevity. If you purchased a home computer for $3,000 three years ago and it turns up missing, your homeowner’s adjuster could determine that a desktop computer’s typical lifespan is five years. Since the laptop was then three years old, the depreciation stat is $1800. The ACV Payment is $1200, which is $3000 – $1800. Your deductible also kicks in and applies for a claim, of which an average amount is $500 – $1000.

What Type of Payments can I expect for Depreciation Insurance?

If your homeowner’s policy does not currently have replacement cost coverage, the check you receive after a claim will be for the ACV minus the deductible. If you are currently covered for replacement cost, you will get a first payment for the ACV of the item so you can begin the process of fixing it or obtaining a new one, and the second payment will then be issued for the recoverable depreciation. Once you receive an ACV insurance payment and begin the process of repair or replacement, you’ll receive a recoverable depreciation payment after you submit your receipts.

Sometimes after a disaster “life just happens” and you get too busy to take care of everything that stacks up on your to-do list. If you don’t follow through with finishing a repair or replacement, you won’t receive the second payment for recoverable depreciation. In this case, you would just receive a check for the item’s ACV. The items that were destroyed are what you are being reimbursed for, and if you decide not to replace them, you won’t receive full compensation.

How do I Begin the Process of a Recoverable Depreciation Claim?

If a disaster or theft happens to you, here are the appropriate steps to take:

  • Notify your insurance provider as soon as possible about the event.
  • Gather all the important information such as receipts, high-res photographs, and police reports.
  • Submit the vital claim form together with supporting documents to the insurance company for prompt assistance.
  • Wait for the company to process your claim.
  • You’ll then receive your first payment to reimburse you for the cash value.
  • Take the time to fully repair or replace the item.
  • Submit the receipt to your insurance provider.
  • You will then receive the second payment to cover recoverable depreciation.

Which Party is the Valid Recipient of the Depreciation Insurance Check?

The final depreciation payment may be issued to you, a lienholder, or the company you employed to repair the item. If your home undergoes damage, your mortgage company may be the one listed on the check because they hold a legal stake in your property. If you are replacing something such as a couch or stove, the payment will be issued directly to you as the owner. These important details can make a difference when it comes down to how quickly you can obtain or deposit the funds you are due.

What Factors Will Affect the Terms of my Recoverable Depreciation Payment?

  • If the actual cost of the replacement item remains at less than the value of your original item, the recoverable depreciation payment will be calculated based on what was originally yours. If you had paid $2000 for a guitar that got destroyed and its replacement cost $1000, you won’t get to claim a check for the difference.
  • If you choose to not replace or repair an item, you will only receive a check for the item’s actual cash value and not a fully-fledged recoverable depreciation check.
  • If you filed a claim for an item that doesn’t depreciate over time such as machinery or jewelry, you won’t receive a second check.
  • Some states will mandate a rigid time that you need to make a claim to receive recoverable depreciation. This has quite a bearing on when you will receive the payment and be able to thoroughly replace what was lost.

Does my Situation Recoverable Depreciation Insurance?

Everyone’s situation is different, but personal belongings are incredibly important to your daily thriving and healthy existence. If anything ever happens to them, you need to ask yourself a very serious question of if you have enough money to cover the full replacement cost. If there is any question about your ability to do this, it’s best to make sure you have replacement cost coverage to allow you to meet that need during a time of extreme stress. Here at the Alexander Insurance Agency of Saint Charles, we have been assisting families and businesses to build their dreams for years and are eager for you to have a plan for the times when the unexpected affects the possessions you have worked so hard for!