Depreciation
Depreciation is the reduction in value of property due to age, wear, and condition. In insurance claims, depreciation is calculated per line item in Xactimate based on each component's specific age and expected useful life - not as a flat percentage across the entire claim.
The Difference Between What It Costs and What They Pay
Depreciation is the reduction in value of damaged property due to age, wear, and condition, and it is the reason the first insurance check never covers the full repair cost. Insurance depreciation is calculated per line item in Xactimate based on each component's specific age, condition, and expected useful life (according to Verisk pricing data). The reality: carriers frequently apply depreciation in ways that are inaccurate, inconsistent, or outright wrong.
Understanding how depreciation works - and where it goes wrong - is one of the most valuable skills in the supplement game.
How Depreciation Should Be Calculated
Each component on a roof has a different age, condition, and expected useful life. Depreciation should reflect that. A 3-year-old ridge vent should not be depreciated at the same rate as a 15-year-old shingle field. A recently installed gutter system should carry minimal depreciation compared to original 20-year-old flashing.
| Component | Age | Expected Life | Reasonable Depreciation |
|---|---|---|---|
| Architectural shingles | 5 yr | 25-30 yr | 15-20% |
| Architectural shingles | 15 yr | 25-30 yr | 50-60% |
| Aluminum gutters | 3 yr | 20-25 yr | 10-15% |
| Ridge vent | 2 yr | 20+ yr | 5-10% |
| Pipe jacks | 10 yr | 15-20 yr | 40-50% |
When the adjuster applies a blanket rate - say 40% across every line item - that is a supplementable error. Newer components are being over-depreciated, and the homeowner is being shortchanged on the ACV payment.
Recoverable vs. Non-Recoverable Depreciation
This distinction determines whether the homeowner ever sees the withheld money. On a replacement cost policy, depreciation is recoverable - the carrier withholds it (the holdback) until repairs are completed, then releases the funds. On an ACV-only policy, depreciation is non-recoverable. The ACV payment is all the homeowner gets.
Check the policy before scoping the job. If it is ACV-only, the depreciation amount is money that is never coming back, and the homeowner needs to understand the gap between the insurance payment and the actual repair cost.
How to Supplement Depreciation Errors
Pull the carrier's depreciation schedule and audit every line. Look for blanket rates applied across different-aged components. Look for components that were depreciated beyond their actual age. Look for items with zero useful life remaining that were not flagged for full replacement.
Document the actual age and condition of each component with photos. If the gutters were replaced 3 years ago, provide evidence. If the ridge vent is newer than the shingle field, note it. Build the supplement around specific line items with specific depreciation corrections. A supplement that says "your depreciation is too high" gets ignored. A supplement that says "line item 14 (aluminum gutters) was depreciated at 40% but was installed in 2023 and should be depreciated at 12%" gets paid.
Further reading
Frequently asked questions
It should not be. Depreciation is supposed to be calculated per line item in Xactimate based on the age and condition of each component. Carriers sometimes apply blanket depreciation rates, which is a supplementable error worth catching.
Yes. If the adjuster depreciated brand-new gutters at the same rate as a 15-year-old roof, that is an error. Each line item should have its own depreciation rate based on its specific age, condition, and expected useful life.
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