If you have recently submitted an insurance claim for damage or loss, you may have noticed that your insurance carrier has claimed non-recoverable depreciation. This can come as a surprise and leave you wondering what it means and why it is being applied to your claim.

Non-recoverable depreciation is a deduction that an insurance carrier takes from the actual cash value (ACV) of an item, such as a vehicle or property, when calculating the amount of your claim. The ACV is the cost to replace or repair the item minus depreciation, which is the decrease in value over time due to wear and tear, age, and other factors. Non-recoverable depreciation is the portion of the depreciation that your insurance carrier considers cannot be recovered or restored by repair or replacement.

The reason your insurance carrier is claiming non-recoverable depreciation is because they believe that the item in question has reached the end of its useful life and that it cannot be restored to its original condition. This can be especially true for items that are older or have suffered significant damage. In such cases, the insurance carrier will deduct the non-recoverable depreciation from the ACV of the item to arrive at the final settlement amount.

It is essential to note that the application of non-recoverable depreciation can significantly affect the amount of your claim. If your insurance carrier is claiming non-recoverable depreciation, it means that you will receive less money than you would have if the item had not suffered any depreciation. This can be frustrating, especially if you believe that the item can be repaired or restored to its original condition.

However, it is essential to understand that insurance carriers have a legal obligation to indemnify their policyholders for the damage or loss they have suffered. Indemnification means that the insurance carrier must compensate you for the value of the item at the time of the loss, considering any depreciation that may have occurred. In other words, the insurance carrier is not required to pay you more than the actual value of the item that was damaged or lost.

In conclusion, non-recoverable depreciation is a deduction that your insurance carrier takes from the ACV of an item when calculating your claim. It is used when your insurance carrier believes that the item has reached the end of its useful life and that it cannot be restored to its original condition. Although the application of non-recoverable depreciation can be frustrating, it is essential to remember that insurance carriers have a legal obligation to indemnify their policyholders for the damage or loss they have suffered.

If you have any questions about non-recoverable depreciation or your insurance claim, it is essential to speak with your insurance carrier or a licensed insurance professional. They can provide you with more information and help you understand the settlement process.