When you have a homeowner's insurance policy, it typically covers damage to your home, including damage to the roof. If your roof is damaged, you can file a claim with your insurance company to get it fixed or replaced. Now, when the insurance company pays out for the damage to your roof, they will likely take into account the depreciation of the roof. This is because your roof has a lifespan, and as it ages, it loses value or depreciates. The insurance company will want to pay out only the current value of your roof, not the full cost of a brand new roof.
Here's where recoverable depreciation and non-recoverable depreciation come into play:
Recoverable Depreciation: If your insurance policy includes coverage for recoverable depreciation, it means that you can recover some or all of the depreciation amount when you replace your damaged roof. This means that the insurance company will pay out the depreciated value upfront, but once you've completed the repairs or replacement, you can submit receipts or invoices to the insurance company to claim the recoverable depreciation. This way, you can recoup some of the lost value of your roof.
Non-Recoverable Depreciation: If your insurance policy doesn't include coverage for recoverable depreciation, it means that you won't be able to recover any of the depreciation amount. This means that the insurance company will pay out the depreciated value upfront, and you won't be able to claim any additional funds once the repairs or replacement are completed. This could leave you with additional out-of-pocket expenses if the cost of repairs or replacement exceeds the insurance payout.In summary, recoverable depreciation means that you can recover some of the lost value of your roof after it's been damaged, while non-recoverable depreciation means that you won't be able to recover any of the lost value. It's important to understand the type of depreciation coverage you have when you file an insurance claim to ensure that you're aware of any potential out-of-pocket expenses.