Depreciation Traps

Insurance Companies Love Depreciation

Depreciation is a loss of value to property because of age or obsolescence. In order for something to depreciate, it must actually lose value over time. Things like paint, roofs, fences and siding all depreciate. How much depends on how well you keep your property.

Insurance companies will pay damage to your property based on a depreciated amount. For instance, if you have a roof with a 20 year lifespan in a storm destroys it when it’s 10 years old your insurance company will only pay you 50% of the value of the roof.

Sounds reasonable. It rarely is. If your property is well-maintained your depreciation is probably a fraction of what your insurance company wants to charge you. Also, insurance companies depreciate things such as demolition, debris removal and furniture moving on a regular basis. These are services which cannot be depreciated.

What Should You Do?

If you have a property loss, carefully review your insurance companies estimate of damages. Challenge any depreciation you think is unfair. Insurance companies save millions of dollars by wrongfully depreciating just about everything. Remember, never except the first estimate, always challenge the insurance companies numbers and, if the company cannot prove its numbers, don’t take no for an answer. A little bit of knowledge goes a long way.

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