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Florida Property Insurance Claims: What is Depreciation?

You likely own many different valuable assets that experience wear and tear and will eventually need to be replaced. This loss of value is known as depreciation. Issues related to depreciation may potentially come up in your property insurance damage claim. In fact, many disputes arise over the valuing of depreciable property.

Recovering Compensation for a ‘Depreciable’ Item

Under some Florida property insurance policies, damaged or destroyed items are compensated for their ‘actual cash value’. In other words, whatever the item was worth at the time it was damaged is the amount you will be able to recover. This sounds straightforward enough, but in reality, can become extremely complex. Property owners should have a basic understanding over how depreciation is used in calculations.

Calculating Depreciation: Two Common Examples

Depreciation is generally calculated by assessing an item’s replacement cost value along with its life expectancy. To best understand how this works in practice, please consider the following two examples of straight line depreciation:

  • Depreciation and Computers

We all know that technology progresses quickly. There is probably no more clear example of this than your computer. A computer that was purchased ten years ago is already generally considered to be completely obsolete. Computers have a short life expectancy and this means that your computer will depreciate very rapidly. To assess how much your computer is worth for purposes of an insurance claim, you will need to know its initial value along with its life expectancy. For example, imagine that you purchased a computer for $1000. Let’s assume that computer had a life expectancy of five years. That means that every year, the computer will depreciate by 20 percent or 1/5th of its initial value. Therefore, if after three years from the purchase date, you filed a property damage claim for that $1000 computer, it would be worth $400 for the purposes of your insurance claim.

  • Depreciation and Your Roof

The same concept also applies to structural improvements. For example, this issue often comes up in roof damage claims. Eventually, every roof will need to be repaired or replaced. Of course, a roof lasts for much longer than does a computer. This means it has a much longer life expectancy. A roof may have something closer to a 25-year life expectancy. In that scenario, the roof would depreciate at a rate of 4 percent, or 1/25th of its initial value, each year. If you purchased the roof for $10,000, and filed a total loss property damage claim ten years later, your roof would have depreciated by 40 percent. Therefore, you would be entitled to recover compensation for 60 percent of the initial value of the roof, or $6,000.

Do You Need Legal Advice?

The Fort Lauderdale property insurance lawyers at Geyer Fuxa Tyler can help. If you have been offered less than full value for your damage, please contact our office today. We will review your claim for free, with no strings attached. Our firm represents property owners throughout Broward County, including in Hollywood, Miramar and Coral Springs.


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