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What is recoverable depreciation?

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May 09, 2014 5:29PM

Recoverable Depreciation may be recovered from the insurance company.

Recoverable depreciation usually refers to monies held back for repairs. In essence, once a claim has been filed, usually by phone on a 24 hour claim hotline, an adjuster from the insurance goes to the home that has been damaged, assesses the damage, mails the itemization breakdown of damages called a "Scope" to the claimant showing amount of money allowing for repairs. Sometimes a check is sent before the Scope is sent, sometimes with, and sometimes after. State Farm prints out a Scope along with a check on the spot the same day. The check will be an amount minus the deductible. The insurance company holds back the "Recoverable Depreciation" until proof that repairs has been completed is received. This proof usually comes from the contractor. However, proof may be accepted by the insurance company from the claimant with certain documentation requested by the insurance company provided by the contractor. Their are cases in which the insurance company will send both the initail repair check and recoverable depreciation together in one check. This may occur if the claimant owns the home with no mortgage company involved or the amount of both checks are small usually $5,000 or less. If the claim check issued by the insurance company is larger than $5000 the check may have the check issued to the claimant and the mortgage company. If this is the case, the claimant must send endorse the check over to the lender and the lender than will cash the check and mail their own check back to the claimant. This can take 1-4 weeks depending on the lender and location. With many insurance companies, if the claimant does not have the work done within a designated time, usually, 180 days from the date the damage occured, the recoverable depreciation may be lost.

The insurance companies argue that this is to protect the consumer when, more often than not, it serves to frustrate rather than help the claimant.

These monies are not to be confused with 'uncovered or disallowed' claims. Recoverable depreciation is "incentive" money that has already been determined as needed by the claimant to help with repairs. More times than not, the initial check is NOT enough to cover the total of repair and the claimant may be in a pickle if they cannot find a contractor to work with them on a partial payment and then reimbursed by the insurance company after completion of repairs.