Every item depreciates (loses value) over time and through normal wear and tear. Non-
recoverable depreciation by the insurer means the item is ineligible for reimbursement.
Essentially, it’s a determination by the insurance company that the item has depreciated past
any significant value.
In an actual cash value (ACV) policy, the insurer only pays for what the item is worth minus
depreciation. In contrast, a policy that pays replacement cost value (RCV) would reimburse you
for the amount it would cost to replace the item at today’s prices.
With an ACV policy, it’s possible to have multiple items with non-recoverable depreciation,
meaning no reimbursement will be made on that particular item. There may even be
exceptions in an RCV policy on some items or in regard to the cause of the damage. The insurer
may also use a combination of ACV and RCV to determine reimbursement value. Insurers
typically have a list of items that are subject to non-recoverable depreciation.
It’s critical that you keep receipts for every item you purchase, from appliances and furniture to
designer clothing and electronics so you can dispute any items the insurer deems is subject to
non-recoverable depreciation if need be.
When you make a claim, the insurer will pay their portion of the damages, minus your
deductible. In many instances, you may be able to pay the deductible from the reimbursement
amount, which will reduce the amount of money you receive. It’s a good idea to keep receipts
on all of the repairs or replacement that you paid for in case there’s a problem later. You can
prove you paid your part to the insurer.
Homeowner’s insurance isn’t nearly as straightforward as you might think. ACV, RCV, and
exclusions are just some of the ways that insurers write policies to minimize pay-outs to clients
and maximize their profitability.