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Recoverable Depreciation

Whart is Recoverable Depreciation?

Recoverable Depreciation is the portion of your insurance claim that’s withheld initially and paid to you after you complete repairs and provide proof of payment. It represents the difference between Actual Cash Value (ACV) and Replacement Cost Value (RCV).

In simple terms: It’s the money your insurance company holds back until you prove you actually fixed your roof.

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How Recoverable Depreciation Works

When you file a roof insurance claim with a Replacement Cost Value (RCV) policy, most insurance carriers use a two-payment system:

The Two-Payment System

Payment #1: Actual Cash Value (Initial Check)

  • Paid when your claim is approved
  • Equals RCV minus depreciation minus deductible
  • This is typically 40-80% of your total claim value

Payment #2: Recoverable Depreciation (Final Check)

  • Paid after you complete repairs
  • Equals the depreciation amount that was withheld
  • Requires proof of completed work and payment

Why Insurance Companies Withhold Depreciation

Insurance carriers withhold recoverable depreciation to ensure you actually replace your damaged roof. Without this requirement, homeowners could:

  • Pocket the full RCV without making repairs
  • Make cheap, substandard repairs and keep the difference
  • Leave properties in damaged condition

By withholding depreciation until completion, carriers guarantee repairs happen before paying the full claim amount.

How Recoverable Depreciation Is Calculated

The recoverable depreciation amount depends on your roof’s age and condition:

Basic Formula

Recoverable Depreciation = RCV – ACV

Or stated differently:

Recoverable Depreciation = Total Depreciation Amount

Example Calculation

  • Replacement Cost Value (RCV): $25,000
  • Depreciation (based on 15-year-old roof): $12,500 (50%)
  • Actual Cash Value (ACV): $12,500
  • Your Deductible: $2,000

Payment breakdown:

  • Initial check (ACV): $10,500 ($12,500 – $2,000 deductible)
  • Recoverable depreciation: $12,500 (paid after completion)
  • Total you receive: $23,000 (RCV $25,000 – deductible $2,000)

Depreciation Schedules Vary by Carrier

Each insurance company calculates depreciation differently:

  • State Farm: Typically uses straight-line depreciation over 20-25 year lifespan
  • Allstate: May use accelerated depreciation for roofs over 15 years
  • USAA: Often more favorable depreciation schedules
  • American Family: Standard depreciation based on expected lifespan

A 10-year-old roof might be depreciated 40-50% depending on the carrier.

How to Recover Your Withheld Depreciation

Follow these steps to receive your recoverable depreciation payment:

Step 1: Complete the Roof Replacement

Hire a qualified contractor and have your roof replaced according to the scope approved in your claim.

Step 2: Gather Required Documentation

Most insurance companies require:

  • Final paid invoice from your roofing contractor (showing $0 balance due)
  • Proof of payment: Cancelled check, credit card receipt, or bank statement
  • Certificate of completion: Signed document from contractor stating work is complete
  • Final inspection report: If required by local building department
  • Photos of completed work: Some carriers request before/after photos
  • Lien waiver: Document showing contractor has been paid and won’t file a lien

Step 3: Submit Recovery Request

Send your documentation package to your insurance company with a formal request for recoverable depreciation. Include:

  • Your claim number
  • Policy number
  • Clear statement requesting recoverable depreciation payment
  • All required documentation listed above

Submission methods:

  • Online portal (fastest – most carriers have this)
  • Email to your claims adjuster
  • Fax (some carriers still use this)
  • Mail (slowest option)

Step 4: Follow Up

If you don’t receive confirmation within 5-7 business days:

  • Call your claims adjuster to confirm receipt
  • Ask for estimated processing timeline
  • Document all communication (dates, names, what was discussed)

Step 5: Receive Payment

Once approved, the insurance company issues your recoverable depreciation check. Payment typically arrives 2-4 weeks after submitting complete documentation.

When You Get Paid: Recoverable Depreciation Timeline

Typical Timeline

  • Day 1: Claim approved, receive initial ACV check
  • Weeks 1-6: Hire contractor, schedule work, complete replacement
  • Week 7: Submit documentation package to insurance company
  • Weeks 8-10: Insurance company reviews and processes
  • Week 10-11: Receive recoverable depreciation check

Total time from claim approval to final payment: Typically 2-3 months

Deadlines to Recover Depreciation

You must complete repairs within your policy’s specified timeframe or you forfeit recoverable depreciation. Common deadlines:

  • State Farm: 180 days (6 months)
  • Allstate: 180-365 days depending on policy
  • USAA: 180 days standard
  • American Family: 365 days (1 year)
  • Farmers: 180 days typical

Important: These deadlines typically start from the date of your initial ACV payment, not from the storm date. Check your specific policy or settlement letter for exact deadlines.

What If You Need More Time?

If you can’t complete repairs within the deadline due to:

  • Contractor scheduling delays
  • Weather preventing work
  • Material shortages
  • Personal circumstances (illness, family emergency)

Contact your insurance company immediately and request an extension. Many carriers grant extensions if you have a signed contract and legitimate delays. Get any extension approval in writing.

Common Recoverable Depreciation Problems

Issue #1: Missing the Deadline

Problem: Homeowner doesn’t complete repairs within the specified timeframe and loses recoverable depreciation permanently.

Prevention:

  • Know your deadline from day one
  • Hire contractors immediately after claim approval
  • Build in buffer time for weather delays
  • Request extensions early if needed

Issue #2: Insufficient Documentation

Problem: Insurance company rejects recovery request due to incomplete or incorrect documentation.

Common documentation mistakes:

  • Invoice shows balance due (must show $0 balance or “Paid in Full”)
  • No proof of actual payment provided
  • Completion certificate missing or not signed
  • Work scope doesn’t match approved claim

Prevention: Request a complete documentation checklist from your insurance company before starting work.

Issue #3: Contractor Cost Less Than RCV

Problem: Homeowner hires cheap contractor for $18,000 but RCV was $25,000. Insurance only pays based on actual cost.

What happens:

  • Actual contractor cost: $18,000
  • Deductible: $2,000
  • Total insurance pays: $16,000 ($18,000 – $2,000)
  • Recoverable depreciation lost: $7,000 (the difference between $25,000 RCV and $18,000 actual cost)

Prevention: Use qualified contractors whose bids align with insurance RCV estimates. Cutting corners costs you money.

Issue #4: Scope Gaps

Problem: Contractor completes work that differs from the approved claim scope.

Example: Insurance approved architectural shingles, but contractor installed three-tab shingles. Insurance may reduce recoverable depreciation to match actual work performed.

Prevention: Ensure contractor’s work matches the approved claim scope exactly. Any changes should be documented and approved by insurance before work begins.

Issue #5: Carrier Processing Delays

Problem: Insurance company takes months to process recoverable depreciation even with complete documentation.

What to do:

  • Follow up weekly if no response after 2 weeks
  • Request supervisor review if adjuster is unresponsive
  • File complaint with Colorado Division of Insurance if unreasonable delays continue
  • Document all communication attempts

Real Colorado Springs Recoverable Depreciation Examples

Example 1: Successful Recovery on Older Roof

  • Homeowner: Mrs. Close, 93 years old
  • Roof age: 22 years
  • Carrier: American Family
  • RCV: $28,000
  • Depreciation: $10,000 (heavily depreciated due to age)
  • ACV: $18,000
  • Deductible: $2,500

Timeline:

  • Week 1: Claim approved, received $15,500 initial check (ACV minus deductible)
  • Weeks 2-5: Roof replacement completed
  • Week 6: Submitted complete documentation package
  • Week 9: Received $10,000 recoverable depreciation check

Result: Despite heavy depreciation due to roof age, Mrs. Close received full RCV coverage (total $25,500 after $2,500 deductible).

Example 2: Missed Deadline – Depreciation Forfeited

  • Homeowner: Colorado Springs resident
  • Carrier: State Farm (180-day deadline)
  • RCV: $22,000
  • Recoverable depreciation: $8,000
  • Initial payment: $12,000 (ACV minus deductible)

What happened:

  • Homeowner delayed hiring contractor for 4 months
  • Contractor scheduling added 2 more months
  • Missed 180-day deadline by 3 weeks
  • State Farm refused to pay recoverable depreciation
  • Lost: $8,000

Lesson: Know your deadline and build in buffer time for delays.

Example 3: Supplemental Claim Increased Recoverable Depreciation

  • Homeowner: Mr. Marfisi, Colorado Springs
  • Carrier: Allstate
  • Original RCV: $20,000
  • Original depreciation: $6,000

Discovery during tear-off: Rotted decking not visible in initial inspection

  • Supplemental claim: Additional $10,000 for decking
  • New total RCV: $30,000
  • New total recoverable depreciation: $9,000 (original $6,000 + $3,000 for decking)

Result: Homeowner received $9,000 in total recoverable depreciation after submitting both original and supplemental claim documentation.

Common Questions About Recoverable Depreciation

What happens if I never submit for recoverable depreciation?

You forfeit it. The money stays with the insurance company. Even if you completed the repairs, you must actively submit documentation to receive payment. It doesn’t happen automatically.

Can I get recoverable depreciation if I do the work myself?

Usually no. Most insurance companies require professional contractor invoices for recoverable depreciation. DIY repairs, even if properly completed, typically don’t qualify.

Exception: Some carriers may pay if you can provide:

  • Receipts for all materials matching the scope
  • Proof of proper permits and inspections
  • Evidence of professional-quality work

Check with your carrier before attempting DIY repairs if you want to recover depreciation.

What if my contractor’s price is higher than the RCV estimate?

File a supplemental claim if actual costs exceed the RCV due to:

  • Hidden damage discovered during work
  • Code requirements not in original estimate
  • Material price increases

You can’t increase RCV just because you chose a more expensive contractor, but legitimate additional costs should be covered through supplemental claims.

Does recoverable depreciation count toward my deductible?

No. Your deductible is subtracted from the ACV (initial payment). The recoverable depreciation is paid in full with no additional deductible applied.

Example:

  • RCV: $30,000
  • Depreciation: $10,000
  • ACV: $20,000
  • Deductible: $2,000

You receive:

  • Initial: $18,000 (ACV $20,000 – deductible $2,000)
  • After completion: $10,000 (full recoverable depreciation, no deductible)
  • Total: $28,000

Can insurance companies deny recoverable depreciation?

Yes, if:

  • You miss the deadline for completing repairs
  • Documentation is insufficient or incorrect
  • Work doesn’t match approved scope
  • You can’t prove payment was made
  • Actual costs are less than RCV (you only get what you spent)

They cannot deny recoverable depreciation if you’ve met all policy requirements and submitted proper documentation within deadlines.

What if I sell my house before completing repairs?

Recoverable depreciation rights typically stay with the property, not the person. Check your policy, but generally:

  • If repairs are incomplete: The new owner can complete repairs and claim recoverable depreciation (if within deadline)
  • If you completed repairs: You can submit for recoverable depreciation even after selling

This can be negotiated in the sale. Some sellers complete repairs and claim depreciation before closing. Others assign the right to buyers as part of the transaction.

Need Help Recovering Your Withheld Depreciation?

Understanding recoverable depreciation is one thing. Actually recovering it requires meeting carrier-specific deadlines, submitting proper documentation, and navigating potential obstacles.

Professional claim advocacy helps Colorado Springs homeowners:

  • Track and meet carrier-specific deadlines
  • Ensure contractor work matches approved scope
  • Gather complete documentation packages
  • Challenge denials if documentation is wrongly rejected
  • Maximize recoverable depreciation through supplemental claims

📞 Call to discuss your claim: (719) 210-8699
📧 Email: gerald@winik.io

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Part of the Gerald Winik Roof Insurance Glossary | Colorado Springs claim advocacy since 2013