Depreciation

The value stuff loses as it ages and gets used. It’s the difference between “replacement cost” and “actual cash value.”

Depreciation is the value property loses as it ages and gets used. It’s the gap between what something cost new and what it’s worth today.

It’s central to how claims are paid. An actual-cash-value settlement subtracts depreciation, so you’re paid the used value; a replacement-cost settlement doesn’t, so you’re paid to buy new. On replacement-cost policies, the withheld depreciation (the “recoverable depreciation”) is paid once you actually repair or replace the item.

Understanding depreciation is what makes an ACV-versus-replacement-cost decision click — it’s literally the money at stake between the two.

This is a friendly general explanation, not legal or policy language. Exact coverage depends on your policy, carrier, and state. 🤝

Written and reviewed by the We Insure Things team — licensed independent insurance agents. Last reviewed July 23, 2026. Questions? Ask a licensed agent.