Due to the recent Hail Storm in the Greater New Orleans area, many homeowners have received a claims estimate for roof replacement. The claims check will be issued per the estimate minus your deductible and we are seeing insurance companies are withholding “recoverable depreciation” from the claims check.
Recoverable Depreciation is sometimes used when you have a replacement cost homeowners insurance policy.
Insurance Companies are paying you the Replacement Cost minus depreciation even though you have a Replacement Cost policy. The insurance company is asking you to prove you are going to replace the item included in the estimate. Once you show proof of replacement or repair, the insurance company will issue the remaining amount on the estimate labeled “recoverable depreciation”
Language in the homeowners insurance policy allows insurance companies to use “recoverable depreciation”.
What if I don’t want to repair or replace the items on the estimate can I just keep the money?
Yes you can keep the money, but the insurance company will consider the damage “unrepaired” and if you have another claim, you will not be paid for repair or replace of the item again.
Hail Storm hits your area in June and you receive a roof replacement estimate of $8,000 with $1500 withheld from the claim check for recoverable depreciation. You decide to keep the $6500 and not replace your roof.
A few months later a hurricane hits your area and everyone is getting a new roof. You sustain significant roof damage to your house. The company will not pay you anything for your roof because the photographs indicate the roof has not been replaced. You can not be paid twice for the same damaged item unless you can prove you repaired or replaced the item. You also run the risk of denial of any resulting damage from the roof such as water intrusion because you failed to replace the roof.
What if I just keep the money from the claim check, cancel the policy and go with another insurance company?
You can but home insurance companies today will run a claim history report and they will perform an inspection of your house upon binding the new policy. In the above example, if the new insurance company inspects the roof and determines the roof has existing hail damage, the new insurance company will either cancel the policy or give 30 days to replace the roof in most cases. Once again existing damage will result in a denial or reduction of any future claim payments.
Some Louisiana Homeowners have decided to keep the claim payment check and not repair the damage. If you decide to do this, you need to be aware of the consequences as we head into the upcoming Hurricane season.