Often times during the Claims process, both the Homeowner and Business Owner have asked how the Insurance Company calculates Depreciation. Most Policies don’t disclose that process whether by their formulas or how they base Value on particular items. Certain items can be Depreciated though and we explain some of those deciding factors here. Basically, the rule of thumb is this, Materials can and do depreciate while Labor costs and other items Appreciate.
How do Materials Depreciate?
Let’s say the Depreciation question is over Drywall and that drywall was initially installed with a lifespan of 50 years. For every year the drywall has been hanging, we’ll say 10 years, it Depreciates around 2%. In effect, the Insurance Company can Depreciate that Materials’ ‘Cost’ (the cost of the drywall itself) by 20%.
However, they cannot Depreciate the Materials List by 20% as a whole because that List contains and refers to other items that do not Depreciate. Some of those items included in that List may, in fact, Appreciate. The Labor Costs to install that drywall is one of them. Costs for Labor have gone up with Inflation over the years and most of us know it costs much more money today to hire someone to paint, install a roof, build a bathroom and so on than it did 15 years ago.
What about Depreciating our Household Contents?
The Depreciation process can be Subjective in general and one particular example comes to mind. We have a client who owns an older dining set and it was damaged by embedded glass after the Hurricane. The Insurance Company didn’t see value in that table and their response was for the Homeowner to ‘just remove the glass and use some Pledge on it.’ That item though is an Antique table and has been Appreciating over time.
For household items like this, Noble Public Adjusting Group works closely with Curators who can properly evaluate our Clients’ Art, Antiques, and so forth. We also work very closely with other industry professionals to ensure we address those areas of Depreciation and Appreciation, which often go overlooked or misunderstood. Our goal is to go after the most money for everything your Policy legally covers.
If you need help with your Claim, regardless if you are a Homeowner or Business Property Owner, give Noble Public Adjusting Group a call.