Depreciation in Florida Homeowners Insurance Explained

In Florida homeowners insurance (HO‑3, HO‑6, DP‑3), Depreciation is the reduction in value of property due to age, wear and tear, or condition. Carriers apply depreciation when calculating Actual Cash Value (ACV) payments on a claim.

Depreciation represents how much of the item’s useful life has already been used. The older or more worn an item is, the higher the depreciation deduction.

How Depreciation Works

Depreciation is subtracted from the replacement cost of an item to determine its ACV.

Formula:

Replacement Cost – Depreciation = Actual Cash Value (ACV)

Example

Roof replacement cost: $12,000
Roof age: 10 years
Useful life: 20 years
Depreciation: 50%

$12,000 – $6,000 = $6,000 ACV

The carrier pays ACV first, then releases depreciation later if the policy includes Replacement Cost (RCV) and repairs are completed.

Recoverable vs. Non‑Recoverable Depreciation

Recoverable Depreciation: Paid back to you after repairs are completed. Common in HO‑3 and HO‑6.
Non‑Recoverable Depreciation: Not paid back. Common in older DP‑3 policies or certain endorsements.

Where Depreciation Applies

Roof claims (shingles, tiles, metal)
Water damage (flooring, cabinets)
Fire damage (contents and structure)
Theft claims (electronics, furniture)
Landlord DP‑3 claims (appliances, interior finishes)

Where Depreciation Does NOT Apply

Additional Living Expenses (ALE)
Liability claims
Medical payments
Debris removal

Why Depreciation Matters in Florida

Florida carriers frequently apply depreciation due to roof age, water damage frequency, and high claim volume. Understanding depreciation helps homeowners know: