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Understanding depreciation

Your home and most of its contents, such as your television, your washing machine and even your roof, may lose value over time due to factors such as age, wear and tear, and obsolescence. This loss in value is commonly known as "depreciation."

Under most insurance policies, claim reimbursement begins with an up-front payment for the actual cash value of your damage, or the value of the damaged or destroyed item(s) at the time of the loss.

If you have replacement cost coverage included on your policy, you may be able to receive additional money to cover the depreciation of these items. If this is the case, reimbursement may involve two or more payments – one for your initial payment based on the actual cash value of your items and then additional payment(s) once you repair and/or replace the damaged or destroyed items and provide us with documentation.

Here´s some more information on how we calculate depreciation and determine whether or not you are entitled to any additional payment(s).

Calculating depreciation

Generally, depreciation is calculated by evaluating an item´s replacement cost value (i.e., the current cost of repairing the item or replacing it with a similar one) and its life expectancy (i.e., the item´s average expected lifespan).

For example, let´s say your 37-inch LCD television was destroyed in a house fire. You bought the television four years ago and it was in good condition before the fire. A similar television is sold in stores today for $1,000 (the replacement cost value). This television has a life expectancy of 10 years, meaning it loses 10% of its value each year. Because your television was four years old, it had lost 40% of its value before being destroyed by the fire. Therefore, the actual cash value (i.e., the value at the time of the loss) of your television is $600. Here is the calculation:

Cost of new TV today

(Replacement cost value)
or $400
(4 years x 10% per year)
Value of your TV
(Actual cash value)

This calculation technique also applies to most of the structural components of your house that wear out over time, such as the roof. If your house has a 25-year composition shingle roof, it would depreciate at 4% a year under normal conditions. If the roof is 10 years old at the time of your loss and it requires replacement, we would subtract 40% depreciation (10 years x 4% a year) from your replacement cost estimate to determine the actual cash value of your roof. Please keep in mind the condition of an item may also factor into the depreciation calculation.

Understanding your Travelers estimate

The estimate provided by your Travelers claim representative outlines your initial claim payment (noted as "Net Claim") based on the actual cash value of your property, less your deductible.

If you have replacement cost coverage, you may also see an amount for "Recoverable depreciation." This is the total amount of depreciation shown on your estimate based on the age and condition of your damaged item(s). In the example above referencing your television, the recoverable depreciation is $400.

Replacement cost value
Less depreciation
Actual cash value
Less deductible
Net claim
Recoverable depreciation
Net claim if all depreciation is recovered

Submitting a request for recoverable depreciation

If you have replacement cost coverage, here are the next steps you should take:

  • Repair or replace the damaged or destroyed item(s).*
  • Save all invoices, signed contracts, receipts and/or canceled checks associated with the repair or replacement of your property and submit them to your claim representative.
    • Specify in writing at the top of each receipt or invoice which items were replaced and/or what work was completed.
    • Provide either the original documents or legible copies to your claim representative, and remember to keep copies for your files.
    • Include your Travelers claim number on all correspondence.
  • Once your request for reimbursement is received, your claim representative will contact you to discuss any additional payment(s).

* Your potential reimbursement is governed by the replacement cost. If you find that you cannot repair or replace damaged or destroyed item(s) for the replacement cost established on your estimate, please contact your claim representative before repairing or replacing the item(s).

Also, please keep in mind that when repairing or replacing an item, you can only recover the amount you actually spend. For instance, in our earlier example we determined the replacement cost value of your television was $1,000. If you purchase a replacement television for $900 and submit a request for the recoverable depreciation, Travelers will reimburse you $300–the difference between the actual cash value of your previous television ($600) and the cost of your new one ($900).

Frequently asked questions about depreciation

  • How do I know if I have replacement cost coverage?
  • How do you determine the value of my property?
  • Are there deadlines I must meet to receive the recoverable depreciation?
  • What if I decide to buy a more expensive item to replace the one I lost?
  • What if I decide not to repair or replace my damaged items?

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