Depreciation Holdback
The portion of the replacement cost that an insurance carrier withholds from the initial claim payment, representing the depreciation on damaged materials and labor. This amount is recoverable after repairs are completed.
What Is Depreciation Holdback
Depreciation holdback is the portion of an insurance claim payment that the carrier retains until repairs are completed. The holdback represents the depreciation applied to damaged materials and labor. On replacement cost policies, this amount is recoverable.
How It Works
When a carrier pays a claim on a replacement cost policy, they issue two payments. The first payment is the actual cash value (ACV), which is the replacement cost minus depreciation minus the deductible. The second payment is the depreciation holdback, released after the policyholder completes the repairs and submits documentation.
Recovering the Holdback
To recover the depreciation holdback, the policyholder must complete the repairs within the policy's specified time frame (typically 180 days to 2 years depending on the policy and state), submit the final repair invoice, and allow the carrier to verify the work was completed. The carrier then releases the holdback amount.
Frequently asked questions
Depreciation holdback is the amount an insurance company withholds from the initial claim payment. It represents the depreciation (loss of value due to age and wear) on the damaged property. On a replacement cost policy, this money is released after the repairs are completed.
Complete the repairs using a licensed contractor and submit the final invoice to the carrier. The carrier reviews the invoice to confirm the work was done and releases the depreciation holdback, minus the deductible.
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