How depreciation and holdback work
On a replacement cost policy, the carrier usually pays actual cash value first: replacement cost minus depreciation, minus your deductible. The depreciation it withheld is called recoverable depreciation or holdback. You typically recover it after repairs are completed and documented, within the time your policy allows.
Using the depreciation recovery calculator
- Add a row for each major item: roof, siding, flooring and so on.
- Enter its replacement cost, its age and a reasonable expected life.
- Set your deductible and the depreciation cap your estimate uses, if any.
- Check the box if your policy pays actual cash value only.
Where depreciation gets argued
Carriers sometimes depreciate labor, apply short life expectancies or depreciate items well beyond their actual wear. Each of those choices can be questioned. Depreciation also matters in appraisal, because many award forms list replacement cost and actual cash value separately.
The calculator uses straight-line depreciation for illustration. Your carrier’s method may differ.
Questions about this tool
How long do I have to recover depreciation?
Your policy sets the window, and it varies. Check the loss settlement section and ask the carrier in writing if anything is unclear.
Can labor be depreciated?
Practices and rules vary. If your estimate depreciates labor, it is worth asking how and why.
What if my policy pays ACV only?
Then the depreciation is not recoverable, and the ACV figure is the main payment. Tick the ACV-only box to see that result.