What does a deduction for depreciation signify?  Typically it means the insurance company will determine the fair value of the property at the time of loss.  What someone would “pay” for that property based on the age, condition, and wear and tear of that damaged item.

For instance, if your insurance company considers the life expectancy of a roof to be 20 years and your roof is 10 years old at the time of a loss the insurance company will (in addition to your deductible) subtract 50% from the loss amount!

So if the cost to replace a roof is $8,000 the insurance company subtracts $4,000 because of depreciation and then subtracts your deductible from that figure.

Or let’s assume that you own a television that is 10 years old.  You might have paid $500 for that state of the art TV set ten years ago but today it may only be worth $50 and that’s what the insurance company would pay you for that item if your loss is settled on an ACV basis. (Please note that personal property coverage is normally not available on the DF-1, DF-2, or DF-3 policy form unless it is endorsed to your policy)

Keep in mind that certain homeowners, landlord, condo, and renter’s insurance policy forms may offer only ACV loss settlement provisions. In some cases you may elect to have an endorsement placed upon your policy to provide replacement cost coverage.

ACV loss settlements could leave you in a deep hole financially so choose your options wisely.

To find an insurance company offering the best premium rates in the Cincinnati area on homeowners insurance click here.

Or if you have a question please feel free to contact me directly by calling 513-662-7000 or sending a quick email to jack@pathwayinsurance.net