Depreciation

What Is Depreciation?

Depreciation is the reduction in your roof’s value based on its age, condition, and expected lifespan. In insurance claims, depreciation represents the difference between what it costs to replace your roof with new materials (Replacement Cost Value) and what your roof was worth at the time of loss (Actual Cash Value).

Think of it like a car losing value as soon as you drive it off the lot. Your roof loses value each year as it ages, and insurance companies account for this when calculating claim settlements.

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How Depreciation Works in Roof Claims

The Basic Formula

Replacement Cost Value (RCV) – Depreciation = Actual Cash Value (ACV)

Example:

• Replacement cost for your roof: $20,000
• Depreciation (roof is 10 years old): $8,000
• Actual cash value: $12,000
• Your deductible: $2,500
• Initial payment: $9,500 ($12,000 ACV – $2,500 deductible)

Why Depreciation Matters

Depreciation directly impacts how much money you receive from your insurance claim:

With RCV (Replacement Cost Value) coverage:

• Initial payment: ACV minus your deductible
• After repairs: Recoverable depreciation paid back to you
• Result: You eventually receive the full replacement cost

With ACV (Actual Cash Value) coverage:

• Single payment: ACV minus your deductible
• No additional payments after repairs
• Result: You pay out-of-pocket for the depreciated amount

The difference between these coverage types can mean thousands of dollars on your roof claim.

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How Insurance Companies Calculate Depreciation

Standard Depreciation Methods

Straight-Line Depreciation (Most Common)

This method assumes your roof loses value evenly over its expected lifespan.

Formula: (Age of Roof ÷ Expected Lifespan) × Replacement Cost = Depreciation

Example:

• 15-year-old three-tab asphalt shingle roof
• Expected lifespan: 20 years
• Replacement cost: $15,000
• Calculation: (15 ÷ 20) × $15,000 = $11,250 depreciation
• ACV: $3,750 ($15,000 – $11,250)

Accelerated Depreciation

Some materials depreciate faster in early years, then slow down:

• First 5 years: 5% per year
• Years 6-15: 3% per year
• Years 16-20: 2% per year

This method is less common but may apply to certain roof types or in specific policies.

Per-Component Depreciation

Adjusters may depreciate different roof components separately:

• Shingles: Based on warranty period and actual condition
• Underlayment: Often 100% depreciated after 10-15 years
• Flashing: May have longer or shorter depreciation schedules
• Decking: Sometimes not depreciated if structurally sound

Factors Affecting Depreciation Amount

Roof Age

The primary factor in depreciation calculations:

• 0-5 years: Minimal depreciation (10-25%)
• 5-10 years: Moderate depreciation (25-50%)
• 10-15 years: Substantial depreciation (50-75%)
• 15+ years: Heavy depreciation (75-100%)

Material Type and Warranty

Different roofing materials have different expected lifespans:

• Three-tab asphalt shingles: 15-20 year lifespan
• Architectural shingles: 25-30 year lifespan
• Premium designer shingles: 30-40 year lifespan
• Metal roofing: 40-70 year lifespan
• Tile or slate: 50-100+ year lifespan

Longer-lasting materials depreciate more slowly on a percentage basis.

Roof Condition

Well-maintained roofs may receive more favorable depreciation:

• Regular maintenance records can reduce depreciation
• Poor condition may increase depreciation beyond age alone
• Pre-existing damage affects depreciation calculations
• Proper ventilation and installation may be considered

Regional Factors

Climate and weather affect depreciation rates:

• Harsh climates (extreme heat, cold, or weather) may accelerate depreciation
• Mild climates may justify slower depreciation
• UV exposure in southern regions impacts shingle lifespan
• Coastal salt air affects material longevity

Installation Quality

Properly installed roofs last longer and may depreciate more slowly:

• Manufacturer-certified installation
• Compliance with building codes
• Proper ventilation systems
• Quality workmanship documented

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Recoverable vs. Non-Recoverable Depreciation

Recoverable Depreciation (RCV Policies)

What it is: The depreciation amount that your insurance company will pay you AFTER you complete repairs.

How it works:

1. Initial payment: You receive ACV (RCV – Depreciation – Deductible)
2. Complete repairs: You hire a contractor and replace your roof
3. Submit documentation: Provide paid invoices, completion certificates, and photos
4. Final payment: Insurance pays the recoverable depreciation amount

Example:

• Replacement cost: $20,000
• Depreciation: $8,000
• Deductible: $2,500
• Initial check: $9,500 ($20,000 – $8,000 – $2,500)
• After completion: $8,000 (recoverable depreciation)
• Total received: $17,500 ($20,000 – $2,500 deductible)

Requirements to recover depreciation:

• Complete all approved repairs
• Use licensed, insured contractors
• Provide detailed invoices marked “paid in full”
• Submit within policy timeframe (typically 180-365 days)
• Prove work meets code and manufacturer specifications

Non-Recoverable Depreciation (ACV Policies)

What it is: Depreciation that insurance does NOT pay back, regardless of whether you complete repairs.

How it works:

• Single payment: ACV (RCV – Depreciation – Deductible)
• No additional payments after repairs
• You pay the depreciation amount out-of-pocket

Example:

• Replacement cost: $20,000
• Depreciation: $8,000
• Deductible: $2,500
• Total payment: $9,500
• Your out-of-pocket cost: $10,500 ($8,000 depreciation + $2,500 deductible)

Who typically has ACV coverage:

• Older homes (built 30+ years ago)
• Older roofs (15+ years old at policy inception)
• High-risk properties (previous multiple claims)
• Budget insurance policies with lower premiums
• Properties in high-risk weather zones

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Depreciation Disputes and Challenges

Common Depreciation Issues

Excessive Depreciation

The problem: Adjuster applies more depreciation than warranted by the roof’s actual age and condition.

Example: Adjuster depreciates a 12-year-old roof at 80% when its actual condition suggests 50-60% would be fair.

Solutions:

• Provide maintenance records showing proper care
• Have your contractor document actual roof condition
• Show that regional climate doesn’t support excessive depreciation
• Request explanation of depreciation methodology
• Compare to manufacturer’s warranty coverage remaining

Incorrect Lifespan Assumptions

The problem: Adjuster uses incorrect expected lifespan for your roof type.

Example: Adjuster assumes 20-year lifespan for architectural shingles that carry 30-year warranties.

Solutions:

• Provide manufacturer warranty documentation
• Reference industry standards for your shingle type
• Show comparable roofs in your area with longer lifespans
• Cite manufacturer’s expected performance data

Ignoring Maintenance and Condition

The problem: Adjuster applies standard depreciation without considering your roof’s excellent condition.

Example: Your well-maintained 15-year-old roof receives the same depreciation as a neglected roof of the same age.

Solutions:

• Provide annual inspection reports
• Document maintenance activities (cleaning, repairs, treatments)
• Show photos demonstrating excellent condition
• Have contractor provide condition assessment
• Reference manufacturer maintenance requirements you’ve met

Per-Component Over-Depreciation

The problem: Adjuster depreciates every roof component at maximum rates, including items that shouldn’t be heavily depreciated.

Example: Roof decking fully depreciated even though it’s structurally sound and reusable.

Solutions:

• Challenge depreciation on components that don’t deteriorate with time
• Argue that certain items (decking, framing) have longer useful lives
• Request itemized depreciation schedules
• Have contractor identify which components are actually damaged vs. depreciated

How to Challenge Depreciation

Step 1: Document Everything

• Take detailed photos of your roof’s condition
• Gather maintenance records
• Collect manufacturer warranty information
• Get professional condition assessments

Step 2: Request Written Explanation

Ask your adjuster to provide:

• Depreciation calculation methodology
• Expected lifespan assumptions
• Age determination basis
• Per-component depreciation schedules

Step 3: Provide Counter-Evidence

Submit documentation showing:

• Roof’s actual condition is better than assumed
• Expected lifespan is longer than used
• Maintenance has extended useful life
• Regional factors support different depreciation

Step 4: Get Professional Support

• Have your contractor review depreciation calculations
• Consider hiring a public adjuster for significant disputes
• Get independent appraisals if necessary
• Request re-inspection focusing on condition

Step 5: File a Supplement or Appeal

If initial negotiation fails:

• Submit formal supplement request
• Follow your policy’s appeal procedures
• Escalate to insurance company supervisors
• Contact your state insurance department if necessary

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Depreciation and Different Roof Types

Asphalt Shingles

Three-Tab Shingles:

• Expected lifespan: 15-20 years
• Heavy depreciation after 10 years
• Often 100% depreciated at 18-20 years

Architectural/Dimensional Shingles:

• Expected lifespan: 25-30 years
• Moderate depreciation over longer period
• Typically 50% depreciated at 12-15 years

Premium Designer Shingles:

• Expected lifespan: 30-50 years
• Slower depreciation schedule
• May retain 50% value at 20+ years

Metal Roofing

Depreciation characteristics:

• Very long lifespan (40-70 years)
• Minimal depreciation in first 20 years
• Often less than 1-2% per year
• Condition-based rather than age-based

Insurance perspective:

• Lower depreciation rates justified by durability
• Longer expected lifespan
• Higher initial replacement cost spreads depreciation
• May still receive substantial ACV even at 20+ years old

Tile and Slate

Depreciation characteristics:

• Extremely long lifespan (50-100+ years)
• Minimal annual depreciation (under 1%)
• Often depreciated based on condition, not age
• Individual tile replacement vs. full roof considerations

Insurance perspective:

• May argue individual tile replacement rather than full roof
• Matching challenges can reduce depreciation impact
• Higher replacement costs mean substantial ACVs even with depreciation

Built-Up and Modified Bitumen (Commercial)

Depreciation characteristics:

• Expected lifespan: 15-30 years depending on type
• Membrane depreciation separate from substrate
• Maintenance history heavily influences rates
• Condition assessments more important than age alone

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Strategies to Minimize Depreciation Impact

Before You Need to File a Claim

Choose RCV Coverage

When purchasing or renewing insurance:

• Opt for Replacement Cost Value coverage if available
• Understand the premium difference is usually worth it
• Verify whether depreciation is recoverable
• Check for any depreciation limitations or caps

Maintain Your Roof

Regular maintenance reduces depreciation arguments:

• Annual professional inspections
• Prompt repairs of minor damage
• Cleaning gutters and debris
• Treating moss or algae growth
• Documenting all maintenance activities

Keep Detailed Records

Create a roof maintenance file with:

• Installation date and original receipts
• Manufacturer warranty documents
• Annual inspection reports
• Maintenance and repair records
• Before and after photos of maintenance

Install Quality Materials

Premium roofing materials offer advantages:

• Longer warranty periods
• Slower depreciation schedules
• Better condition retention
• Stronger arguments against excessive depreciation

During the Claims Process

Document Current Condition

Before the adjuster arrives:

• Take comprehensive photos
• Have contractor document condition
• Note any recent maintenance or repairs
• Gather proof of roof care

Educate Your Adjuster

Provide information showing:

• Your roof’s actual remaining lifespan
• Maintenance that extends useful life
• Quality of original installation
• Regional factors affecting longevity

Challenge Unfair Depreciation

Don’t accept the first depreciation calculation without review:

• Compare to industry standards
• Get second opinions from contractors
• Research typical depreciation for your roof type
• Request detailed depreciation schedules

Work with Your Contractor

A professional contractor can:

• Identify incorrect depreciation assumptions
• Provide technical explanations for adjusters
• Document actual roof condition
• Support your depreciation challenges

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Depreciation on Partial Roof Claims

Section Replacement Considerations

When only part of your roof is damaged:

Depreciation applies only to damaged sections:

• Not the entire roof value
• Based on square footage being replaced
• May vary by roof plane or section

Matching issues affect depreciation:

• If materials are discontinued, larger sections may need replacement
• Insurance should cover additional costs for matching
• Extended depreciation arguments may apply to matching areas

Example: Partial Roof Damage

Scenario:

• Total roof: 35 squares (3,500 sq ft)
• Damaged area: 10 squares (1,000 sq ft)
• Total replacement cost: $35,000
• Section replacement cost: $12,000
• Roof age: 12 years (expected life 25 years)
• Depreciation: 48%

Calculation:

• Section RCV: $12,000
• Depreciation: $5,760 (48%)
• Section ACV: $6,240
• Your deductible: $2,500
• Initial payment: $3,740
• Recoverable depreciation (after repairs): $5,760

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Special Depreciation Situations

Roof Age Limitations

Some policies include roof age provisions:

Coverage restrictions:

• ACV-only coverage for roofs over 15-20 years old
• Limited depreciation recovery on older roofs
• Required roof inspections at policy renewal
• Potential non-renewal for very old roofs

What this means:

• Check your policy for age-related limitations
• Plan for roof replacement before hitting age thresholds
• Understand coverage may change at renewal

Code Upgrade Depreciation

When repairs require code upgrades:

The issue: Building codes may have changed since your roof was installed.

Depreciation questions:

• Is the upgrade cost subject to depreciation?
• Does ordinance or law coverage affect depreciation?
• Who pays for the “betterment” of code compliance?

Typical approach:

• New code requirements: Often not depreciated (covered by ordinance or law coverage)
• Standard replacement: Normal depreciation applies
• Enhanced materials: May have separate depreciation discussions

Cosmetic Damage Clauses

Some policies exclude or limit coverage for cosmetic damage:

How it works:

• Functional damage: Fully covered (subject to normal depreciation)
• Cosmetic damage: May be excluded entirely or have limited coverage

Depreciation impact:

• If cosmetic exclusion applies, functional damage still subject to depreciation
• May reduce overall settlement if significant damage is deemed cosmetic
• Roof age often factors into cosmetic vs. functional determinations

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Understanding Your Depreciation Payment

Initial Payment (ACV)

What you receive:

• Check for: RCV – Depreciation – Deductible
• Typically issued within 2-4 weeks of claim approval
• May be joint check with mortgage company if applicable

What you can do with it:

• Start roof replacement process
• Pay contractor deposits (but not full payment)
• Cover temporary repairs or emergency fixes
• Keep in reserve until final payment received

Recoverable Depreciation Payment

When you receive it:

• After completing all approved repairs
• Submitting required documentation
• Passing any required inspections
• Within policy timeframe (typically 180-365 days)

What you need to submit:

• Detailed, paid-in-full invoices from contractor
• Completion certificate or final inspection
• Photos of completed work
• Permit sign-offs (if applicable)
• Manufacturer warranty documentation

How long it takes:

• Typically 2-3 weeks after submitting documentation
• May require additional review if scope changed
• Delays possible if documentation is incomplete

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Questions to Ask About Depreciation

When filing a claim or reviewing your policy:

1. Do I have RCV or ACV coverage on my roof?
2. Is the depreciation recoverable or non-recoverable?
3. How did you calculate the depreciation percentage?
4. What expected lifespan are you using for my roof type?
5. Does my roof’s condition justify a different depreciation rate?
6. Are there age-related limitations in my policy?
7. How long do I have to complete repairs and recover depreciation?
8. What documentation do you need to release recoverable depreciation?
9. Does depreciation apply differently to different roof components?
10. Can depreciation be negotiated based on maintenance records?

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Related Roofing Terms

• ACV (Actual Cash Value): Replacement cost minus depreciation
• RCV (Replacement Cost Value): Full cost to replace without depreciation
• Claim: Formal request for insurance coverage
• Adjuster: Insurance professional who calculates depreciation and coverage
• Declaration Page: Policy summary showing whether you have RCV or ACV coverage
• Recoverable Depreciation: Amount paid back after completing repairs
• Deductible: Your out-of-pocket cost before insurance pays

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Professional Guidance on Depreciation Issues

Depreciation can significantly impact your roof claim settlement, often reducing payouts by thousands of dollars. As professional roof consultants, we help homeowners:

• Review depreciation calculations for accuracy
• Document roof condition to challenge excessive depreciation
• Provide maintenance records that support favorable depreciation
• Explain technical factors that justify lower depreciation rates
• Negotiate with adjusters on depreciation disputes
• Ensure you receive all recoverable depreciation you’re entitled to

Concerned about depreciation reducing your claim settlement? Contact us today for a free consultation. We’ll review your roof’s condition, assess whether depreciation is calculated fairly, and advocate for the maximum settlement you deserve.