Recoverable Depreciation: What It Means for ACV & RCV Policies

If you’ve ever filed a property damage claim, you’ve likely heard the term recoverable depreciation and promptly Googled it. Don’t worry, you’re not the only one. 

Understanding recoverable depreciation is critical to making sense of your insurance payout. Whether your policy is based on Replacement Cost Value (RCV) or Actual Cash Value (ACV), recoverable depreciation plays a big role in the payout of your insurance claim. In this guide, we’ll break down what it actually means, how it’s calculated, and how it affects your bottom line.

What Is Recoverable Depreciation?

In simple terms, recoverable depreciation is the amount your insurance carrier withholds from your initial claim payment until repairs or replacements are completed.

When you suffer property damage, your insurance carrier often sends an initial payment based on the depreciated value of what was damaged (this is called ACV). The rest of the money—the amount they deducted for age, wear, and tear—may be recoverable once you prove the work is done.

That’s the recoverable depreciation.

Not all policies include it. Some are non-recoverable, meaning that depreciation is deducted and never reimbursed. That’s why knowing what kind of policy you have matters.

ACV vs. RCV: What’s the Difference?

Before you can understand how depreciation works, you need to know the difference between ACV and RCV:

Replacement Cost Value (RCV)

RCV covers the cost to replace your damaged property with new materials of a similar kind and quality. With RCV, no depreciation is deducted. If your repairs cost $50,000, that’s what your policy should pay.

Actual Cash Value (ACV)

ACV covers the depreciated value of your property. You get paid based on what the property was worth at the time of the damage, even if it’s less than what you originally paid for the item.

If you have an RCV policy, you may be eligible to claim recoverable depreciation once the repairs are done. If you have an ACV-only policy, what you’re paid initially is all you’ll get.

Why Does Recoverable Depreciation Exist?

From the insurance carrier’s perspective, it’s about accountability. If they paid everyone the full RCV up front, some people might take the check and skip the repairs.

For property owners, it’s a double-edged sword:

• • • If you do the work, you should get the full value.
    • If you don’t, your payout could fall thousands short.

It’s designed to encourage you to actually restore your property while protecting carriers from overpaying. But unfortunately, many property owners don’t realize they need to claim the depreciation, and end up leaving money on the table.

Common Misconceptions

Let’s clear up a few myths we hear all the time:

• • • “Recoverable depreciation is paid automatically.”
      It’s not. Generally, you must submit proof of repairs and request the payment.
    • “I can claim it anytime.”
      Most policies have time limits—sometimes 180 days or less. Miss the deadline, and the money might be gone.
    • “Every policy has Recoverable Depreciation.”
      Only RCV policies include recoverable depreciation. ACV-only policies do not.

Bottom Line

Recoverable depreciation may sound like insurance jargon, but it directly impacts how much money you walk away with after a loss. Understanding how it works—and what your policy actually covers—can be the difference between being made whole and being left with a financial gap.

Not sure what kind of policy you have? Let Premier Claims take a look! 

Submit your policy for a free review today!

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