Depreciation
Definition
The reduction in value of property due to age, wear, and obsolescence. Insurers use depreciation to calculate actual cash value settlements. The depreciation schedule varies by item type — roofs, electronics, and appliances all depreciate at different rates.
When This Matters
Your 8-year-old washing machine breaks in a covered water damage event. It cost $1,200 new. The insurer depreciates it at 10% per year, valuing it at $240 on an ACV basis.
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