Standard depreciation math
Straight-line method
- Replacement cost × (age / useful life) = depreciation
- Example: Roof age 10, useful life 25 → 40% depreciation on replacement cost
Condition-adjusted (preferred for insurance)
- Useful life adjusted for actual condition
- Well-maintained item depreciates slower
- Neglected item depreciates faster
Weighted curves
- Depreciation not linear over life
- First years depreciate slower
- Accelerating toward end of life
- Policy-specific language controls
Typical useful life by category
- Roof (shingle): 20-25 years
- Roof (tile): 40-50 years
- Roof (metal): 40-60 years
- HVAC equipment: 15-20 years
- Water heater: 10-15 years
- Flooring (carpet): 5-10 years
- Flooring (hardwood): 30-50 years
- Appliances: 8-15 years
- Paint and finishes: 5-10 years
- Roofing underlayment: 10-20 years
Where abuse happens
Age inflation
- Property age assumed vs. component age
- Recently installed components depreciated on house age
- Documentation (receipts, records) ignored
Condition ignored
- Well-maintained property treated as aged
- Recent inspections dismissed
- Manufacturer warranties ignored
Labor depreciation
- Florida case law: labor is not typically depreciable
- Some carriers depreciate labor anyway
- Challenge with legal citation
Holdback not released
- RCV policies require depreciation release on completion
- Carriers "forget" to release
- Policyholder must request with receipts
Auditing the calculation
- Get the depreciation schedule carrier used
- Verify each age assumption
- Challenge labor depreciation
- Document actual condition
- Track RCV holdback explicitly