Q:

What is recoverable depreciation?

A:

Quick Answer

Recoverable depreciation is the difference between the replacement cost of an insured item and its actual cash value. Recoverable depreciation is used in replacement cost insurance policies, which means that the insurance company values the lost item based on how much it would cost to replace it. By contrast, the actual cash value is the depreciated value of the item at the time of loss.

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Full Answer

Recoverable depreciation sometimes appears on claim checks and other insurance documents to denote the difference between the replacement cost and actual cash value, or ACV. Essentially, the recoverable depreciation is equal to the amount of the items' depreciation. If a three-year-old television is stolen during a home invasion, for example, its ACV might be only $200, but it might cost $800 to replace it. If the owner purchased replacement cost insurance, the homeowner's insurance company would remit a check for $800, but would list the recoverable depreciation as $600.

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