Who Keeps the Recoverable Depreciation Check?

The recoverable depreciation check legally belongs to the homeowner (policyholder), but the funds are intended to cover the remaining cost of repairs after the initial ACV payment. On a replacement cost policy, the carrier releases this second payment after the contractor completes the work and the homeowner submits proof of completion. If there is a mortgage on the property, the check is typically issued to both the homeowner and the mortgage company, requiring both endorsements before anyone can access the funds.

Here's how the process actually works, and how to structure your contracts to make sure you get paid.

How the Two-Payment System Works

On a replacement cost policy, the insurance company pays the claim in two parts:

1. First payment: Actual Cash Value (ACV). This is the replacement cost minus depreciation, minus the deductible. The carrier sends this after the claim is approved.
2. Second payment: Recoverable depreciation. This is the depreciation holdback - the amount the carrier withheld from the first payment. It gets released after the repairs are completed and documented.

When both payments are collected, the homeowner has received the full replacement cost minus only the deductible.

Who the Check Actually Belongs To

The recoverable depreciation check belongs to the homeowner. Full stop. It's their policy, their premium payments, and their claim. The check is made out to them (and possibly their mortgage company).

But here's the practical reality: that money is meant to cover the cost of repairs that have already been completed. If you've finished the roof replacement and the homeowner collects the depreciation check, that money should be going to you to cover your remaining balance.

This is where contracts matter.

How to Protect Yourself in the Contract

Your contract with the homeowner needs to address the recoverable depreciation payment explicitly. Without clear language, you're hoping the homeowner does the right thing after the job is done and the check is in their hands.

Your contract should include:

• Total contract price: The full cost of the repair, not just the ACV amount
• Payment structure: Initial payment from ACV proceeds, remaining balance due upon receipt of recoverable depreciation
• Assignment of proceeds language: Where allowed by state law, include language assigning the insurance proceeds (including recoverable depreciation) to the contractor for the purpose of paying the contract balance
• Homeowner's obligation: Clear statement that the homeowner is responsible for submitting completion documentation to the carrier and directing the depreciation payment toward the remaining contract balance

This isn't about being aggressive. It's about being clear. Most homeowners are happy to pay once they understand how the process works. The problems arise when nobody explains it upfront.

The Mortgage Company Complication

If the homeowner has a mortgage, the carrier often issues the depreciation check to both the homeowner and the mortgage company. Both parties need to endorse the check before it can be cashed.

This adds a step - and sometimes a significant delay. Here's what typically happens:

1. The carrier sends the depreciation check to the homeowner, made out to the homeowner AND the mortgage company.
2. The homeowner sends the check to the mortgage company for endorsement.
3. The mortgage company may require their own inspection of the completed work before endorsing.
4. The mortgage company endorses the check and returns it - or deposits it and disburses the funds in stages.

Some mortgage companies are straightforward about this. Others have a multi-step disbursement process that can take weeks. A few things you can do to minimize delays:

• Alert the homeowner about the mortgage company process before repairs begin, so it's not a surprise
• Help the homeowner prepare the completion documentation the mortgage company will need
• If the mortgage company requires an inspection, coordinate it as soon as the job is done

What Triggers the Depreciation Release

The carrier releases recoverable depreciation after the homeowner submits proof that the repairs were completed. The specific requirements vary by carrier, but generally include:

• Final invoice from the contractor showing the work was completed to the approved scope
• Before and after photos of the completed repairs
• Certificate of completion signed by the homeowner
• Sometimes: material receipts, lien waivers, or a copy of the building permit

The sooner this documentation is submitted, the sooner the check arrives. Don't wait for the homeowner to figure this out on their own. Prepare the documentation and walk them through the submission process.

What If the Homeowner Won't Pay?

Occasionally, a homeowner receives the depreciation check and doesn't direct it toward the contractor's remaining balance. This is rare when the contract is clear and the relationship is good, but it does happen.

Your options:

• Send a formal demand letter referencing the contract terms and the amount owed
• File a mechanic's lien on the property (timelines and requirements vary by state - know your state's lien laws)
• Small claims court for amounts within your state's small claims limit
• Collections or civil litigation for larger amounts

The best defense is a clear contract, a good relationship, and proactive communication throughout the process. Most payment issues aren't malicious - they're the result of a homeowner who doesn't understand the process and thinks the depreciation check is "extra money" from the insurance company.

Can the Homeowner Do the Work Themselves?

Some homeowners ask whether they can do the repairs themselves and keep the depreciation. The answer depends on the policy:

• Some policies require a licensed contractor to perform the repairs before depreciation is released.
• Others allow DIY repairs with adequate documentation (photos, receipts, completion evidence).
• The homeowner needs to check their specific policy language or call the carrier to confirm.

Even on policies that allow DIY, the carrier still won't release the depreciation until the work is done and documented. The money isn't released just because the homeowner says they intend to make repairs.

Time Limits on Depreciation Recovery

Most policies set a deadline for completing repairs and submitting for depreciation recovery. This is typically 180 days to one year from the date of the initial payment, though it varies by carrier and state.

If the deadline passes without repairs being completed, the carrier keeps the depreciation. The homeowner is left with only the ACV payment. This is money that's gone forever.

Make sure the homeowner knows the deadline. If you're scheduling out work several months due to demand, factor in the depreciation recovery deadline when planning the timeline.

The Supplement Connection

If you filed a supplement and the approved scope increased, the recoverable depreciation amount increases too. A higher approved RCV means a higher depreciation holdback, which means a larger second check.

This is one more reason supplements matter: they don't just increase the initial ACV payment - they increase the recoverable depreciation as well. Every dollar you add to the approved scope is a dollar the homeowner ultimately receives (and a dollar that covers your actual repair cost).

Quick Summary

• The recoverable depreciation check belongs to the homeowner but should cover the contractor's remaining balance
• Your contract must clearly address the two-payment structure and the homeowner's obligation
• Mortgage companies add a step - prepare the homeowner for it early
• Submit completion documentation promptly to trigger the depreciation release
• Know the policy's deadline for depreciation recovery
• Supplements increase the recoverable depreciation amount

The recoverable depreciation check shouldn't be a surprise to anyone. Set the expectation during the sales process, put it in the contract, help the homeowner navigate the submission, and follow up until the money arrives. That's how you close out claims cleanly and get paid for every dollar of work you completed.

Related Guides

• Recoverable Depreciation Explained: A Contractor's Guide
• RCV vs ACV: What Every Contractor Must Know
• Depreciation Calculator