What Is Recoverable Depreciation and How Do You Collect It?
Your insurance company approved your claim, cut you a check, and then withheld a portion labeled depreciation. For many homeowners, this is where the confusion starts. What exactly is depreciation in an insurance context? Why is it being held back? And how do you get it released?
Recoverable depreciation is real money your policy entitles you to collect. The process for collecting it is defined, but it requires you to take specific steps after repairs are completed. Homeowners who do not understand the process leave that money uncollected every year. This post explains exactly how it works.
ACV vs. RCV: The Policy Distinction That Drives Everything
Your homeowners insurance policy is either an actual cash value (ACV) policy or a replacement cost value (RCV) policy. The type of policy you hold determines whether depreciation is recoverable at all.
Actual cash value (ACV) policies pay you what your damaged property was worth at the time of the loss, accounting for age and wear. If your 15-year-old roof is destroyed, an ACV policy pays you the depreciated value of a 15-year-old roof, not the cost to put on a new one. There is no second payment. The depreciation is permanently withheld.
Replacement cost value (RCV) policies pay you in two stages. The first payment is the ACV: the depreciated value, paid shortly after the claim is approved. The second payment is the recoverable depreciation: the difference between what the damaged property was worth and what it costs to replace it with new materials. This second payment is released after you complete the repairs and provide documentation to the carrier.
If you are not certain which type of policy you hold, look at your declarations page. It will state either ACV or RCV for the dwelling coverage. If it says RCV, you have the right to recover depreciation. If it says ACV, you do not — but you may be able to add RCV coverage at renewal.
What Depreciation Actually Represents
In insurance, depreciation is a calculation of how much value a component has lost due to age, wear, and expected remaining useful life. Xactimate, the estimating platform used by most adjusters, has depreciation tables for every type of building component. A roof has an expected lifespan. A 10-year-old roof that has used roughly half its expected life would carry significant depreciation in an adjuster’s calculation.
Depreciation applies component by component. On a storm claim that affects the roof, siding, gutters, and windows, each component carries its own depreciation calculation. The sum of those depreciation holdbacks across all components is the total withheld amount you see on your claims worksheet.
On significant claims involving hail and storm damage or fire damage, recoverable depreciation routinely runs into the thousands of dollars. We have seen it exceed $20,000 on larger claims. It is not a rounding error — it is a material payment that homeowners who do not understand the process often never collect.
How the Recoverable Depreciation Collection Process Works
The general process for collecting recoverable depreciation under an RCV policy follows these steps:
- Receive your initial ACV payment. After the claim is approved, the carrier issues the first check covering the ACV of the damage minus your deductible. This is the payment you receive immediately after the claim is settled.
- Complete the repairs. The carrier will not release recoverable depreciation until repairs are completed. “Completed” means the scope of loss has been substantially addressed — not just partially started.
- Obtain documentation of completed repairs. This typically means a final invoice or contractor completion certificate, and may include photos of the finished work.
- Submit a recoverable depreciation request to the carrier. This is a formal written request, typically on a form the carrier provides, accompanied by the contractor’s final invoice demonstrating the scope was completed.
- Carrier reviews and issues the depreciation release payment. The carrier confirms repairs are complete, verifies the invoice matches the approved scope, and issues the second check for the withheld depreciation.
There is a deadline. Most RCV policies require you to submit for recoverable depreciation within 180 days to two years of the original claim date, depending on the carrier and policy language. Read your policy for the specific deadline. Missing it forfeits your right to the payment.
Related: What to Do When Your Mortgage Company Is Holding Your Insurance Check — if a lender is involved, read this before you try to collect depreciation.
What Carriers Typically Require Before Releasing Depreciation
Specific requirements vary by carrier, but the following are standard across most major insurers operating in Michigan:
- Final contractor invoice showing the completed scope of work, the total charged, and confirmation that payment has been or will be made. The invoice should match the approved scope of loss or exceed it (you can spend more than the insurance scope, but the carrier will only release up to the depreciation amount withheld).
- Proof that repairs are complete. Some carriers send an inspector; others rely on the contractor’s invoice and photos. When carriers do send inspectors, this adds time to the process.
- Licensed contractor documentation. Most carriers require that the completed repairs were performed by a licensed contractor. An unlicensed contractor’s invoice may not satisfy the release requirement. In Michigan, your GC must hold a valid state license — Phase III holds license #262000615.
- Signed completion certificate or certificate of satisfaction from the homeowner confirming the work was completed as agreed.
Typical Timeframes
After you submit a complete depreciation release request, most carriers process it within 15 to 30 days. Some carriers are faster; some are slower. If the carrier sends an inspector, add one to three weeks for scheduling and report turnaround. Complex claims with large depreciation holdbacks sometimes face additional review. Submitting a complete, well-documented request is the single most effective way to shorten the timeline.
The overall timeline from initial claim approval to depreciation release on a typical residential claim runs 60 to 120 days. The repair timeline drives most of that window. When contractors are backlogged — which is typical after a regional hail event or major storm — that window extends accordingly.
Why a Licensed Contractor Is Required to Trigger the Release
The practical reason carriers require a licensed contractor is that the depreciation release is tied to proof that the property has been properly restored. A licensed contractor provides a layer of accountability: they are insured, bonded, and subject to state licensing oversight. If the work fails, there is a mechanism for redress.
From the carrier’s perspective, releasing depreciation funds for work performed by an unlicensed party creates risk. If the repairs are substandard and the homeowner files a subsequent claim for the same damage, the carrier is exposed. Licensed contractor documentation closes that loop.
Practically, this means you cannot complete the repairs yourself and submit receipts for materials, then expect the carrier to release depreciation as if a contractor performed the work. Owner-performed repairs create complications with most carriers’ depreciation release requirements. This is one of the clearest reasons that hiring a licensed GC is not just a recommendation but a functional requirement for collecting everything your policy entitles you to.
Common Mistakes Homeowners Make
The mistakes we see most frequently when homeowners try to navigate this process without a contractor’s guidance:
- Not knowing the deadline. Recoverable depreciation deadlines are real and enforced. We have seen homeowners forfeit tens of thousands of dollars because they completed repairs but never submitted the request before the policy deadline expired.
- Assuming the carrier will prompt them. The carrier will not send you a reminder that your depreciation release window is closing. That is your responsibility to track.
- Accepting the ACV payment as the full settlement. Some homeowners cash the initial check without understanding that a second payment exists. If you hold an RCV policy and completed repairs, you are owed more money — but you have to ask for it.
- Using an unlicensed contractor. As described above, this can disqualify the repairs from triggering the release requirement. Verify your contractor’s license before work begins.
- Failing to keep documentation. Carriers will ask for the final invoice. If your contractor does not provide a formal invoice that matches the scope of loss, the process stalls. Get written documentation of everything.
- Completing less than the full scope. If your approved scope covers roof, siding, and windows, but you only replace the roof, the carrier will release only the depreciation portion attributable to completed work. Understand what is being held and what needs to be done before you can claim it.
How Phase III Handles Recoverable Depreciation
Phase III manages the depreciation release process as a standard part of every insurance claim repair we complete. After the job is done, we provide the documentation the carrier needs: a final invoice in the correct format, licensed contractor information, completion certification, and photo documentation of the finished work. We track the release deadline for each client and submit the request on their behalf.
We have handled more than 1,000 claims across SE Michigan since 1993 and recovered more than $10 million for homeowners in Wayne, Oakland, Washtenaw, and Livingston counties. Part of that recovery is the initial scope. A significant part is making sure depreciation releases actually happen — because they do not happen automatically.
If you have a pending claim or a completed repair where depreciation was withheld and you have not yet collected it, check your policy deadline and contact us. Visit our FAQ page for more on how the process works, or reach out directly.
Do Not Leave Depreciation Money on the Table
Recoverable depreciation is money your policy already owes you. The only question is whether you complete the steps to collect it. Phase III Construction is a licensed Michigan GC (license #262000615), BBB A+ rated, and handles the complete claims process — from scope review through depreciation release — for homeowners across SE Michigan.
Call (734) 237-7322 or start your claim online. We will review your policy, your scope, and your depreciation situation at no cost.