How depreciation works
Replacement Cost Value (RCV) = what it costs to replace today Actual Cash Value (ACV) = RCV minus depreciation
Depreciation converts RCV to ACV based on:
- Useful life of the item
- Effective age considering condition
- Straight-line or weighted curve
On an RCV policy, the carrier pays ACV up front and releases the depreciation (the "holdback") when repairs complete.
Trick 1: Inflated effective age
Carriers depreciate based on age, but "age" is a judgment call:
- Was the roof replaced 8 years ago or 18 years ago?
- Was maintenance performed?
- Is the useful life standard or extended?
Carriers routinely assume worst-case age. Documentation of actual age matters.
Counter: receipts, permits, contractor records, prior carrier records.
Trick 2: Depreciating labor
Florida case law generally holds that labor should not be depreciated: only materials. Carriers sometimes depreciate labor anyway.
Counter: cite Florida case law prohibiting labor depreciation; request specific breakdown of depreciation by material vs. labor.
Trick 3: Aggressive depreciation schedules
Carriers use internal schedules that may depreciate items faster than industry-standard useful life:
- Standard: roof 20-25 years
- Aggressive: roof 15 years
- Standard: HVAC 15-20 years
- Aggressive: HVAC 10 years
Counter: cite manufacturer useful-life specs; cite industry standards; challenge the specific depreciation assumption.
Trick 4: Never releasing the RCV holdback
On RCV policies, depreciation is a holdback: released when repairs complete. Many homeowners don't know the holdback exists; even more never follow up to release it.
Counter: submit completed-repair receipts to request holdback release. Track every paid invoice.
Trick 5: Depreciating items that shouldn't be
Some items don't depreciate the same way:
- New paint / finishes (shorter useful life)
- Landscape / lawn (different schedules)
- Appliances (category-specific)
- Code-upgraded components (should be new-standard)
Counter: category-by-category challenge; specific reasonable-life citation.
Trick 6: Condition-unadjusted depreciation
Two 15-year-old roofs can have very different condition. A well-maintained, recently-inspected roof should depreciate less than a neglected one.
Counter: document condition with pre-loss inspections, photos, maintenance records.
Trick 7: Total vs. per-item depreciation
Some carriers apply aggregate depreciation to entire scope; others apply item-by-item. The per-item approach is usually more accurate.
Counter: request depreciation schedule broken down by line item.
How to push back effectively
- Request the full depreciation calculation (not just the total)
- Verify item-by-item reasonableness
- Challenge labor depreciation if applied
- Document actual age and condition
- Submit repair receipts to release holdback
- Escalate aggressively if depreciation seems unreasonable
The RCV holdback reminder
If your policy is RCV and your initial payment is ACV with a holdback, track:
- Total RCV approved
- Depreciation withheld
- Initial ACV payment
- Running total of released holdback as repairs complete
Follow up on every release. Never leave money unreleased.