What is held back depreciation for homes repairs?

Question

My home was damaged in a windstorm and I have replacement cost on my homeowners policy. The are paying the contractor for the repairs and sending me a check for held back depreciation. How does this work? Does mean that they depreciate the materials when they pay the contractor?

Answer 1

The first check is always depreciated because that is all you would get if you decided not to make a repair or to replace an item.  Once the repair is complete, the company will make up the different to replacement value (your deductible should have come out of your first check).  The replacement value will be with like kind & quality.  If you upgrade, you will have to pay for the additional.

In most cases the first check will pay for the downpayment on the contractor's labor & materials.  You never pay a contractor in full until the job is complete and to your satisfaction.  You should get the second check pretty quickly after you submit the final bill & the adjuster reviews it.

Answer 2

the claim is not always depreciated from dollar one-it can vary by company and state. but yes-if the claim crosses the depreciation threshold-the acv payment will be based off the age and quality of the materials being replaced. your particular company might not break it down for you, but only the items replaced are depreciated. once the repairs are completed-send in a paid invoice and get the full amount back. the only time you wouldnt get the full amount back, is if you got the repairs done for less then what the insurance company allowed. they only owe you what it costs you to get the repairs done.  

Answer 3

If you look on the estimate for the repairs- the deprecation that was taken will be noted.

It sounds like your policy is Actual Cash Value until you get the repairs done. Once the repairs are completed -it becomes Replacement Cost and the deprecation that was taken in the estimate is paid to you.

This means-- if you don't get the repairs done and chose to pocket the insurance money - you are settled with at ACV. Most policies have a time limit (such as 180 days from the date of loss) to get the work done and submit proof that the work was done to collect the deprecation.

You will need to pay the contractor the deductible and the deprecation (the hold back).

My company does not handle claims this way, so I may not be 100% accurate. Your agent would be able to explain the process in more detail.