When Is Withheld Depreciation Paid on My Insurance Claim?

This is one of the most important, and most misunderstood, aspects of a property insurance claim. Many policyholders assume the insurance company will automatically pay the full value of their loss. That is not how most claims work.

At Murray Law Group, we regularly see situations where policyholders never recover the withheld portion of their claim simply because they did not understand the requirements.

The Hard Truth

The insurance company is not going to voluntarily send you the rest of your money. Withheld depreciation is earned by complying with your policy, not automatically paid. If you do not follow the required steps, you may never receive it.

What Is Withheld Depreciation?

Under most replacement cost policies, the claim is paid in two stages:

1. The insurance company issues an initial payment based on Actual Cash Value (ACV)
2. A portion of the claim is withheld as depreciation

That withheld amount is referred to as recoverable depreciation. It represents the difference between the depreciated value and the full cost to repair or replace the property.

When Is It Paid?

The answer is controlled by your specific policy, but the general rule is straightforward:

Withheld depreciation under a replacement cost policy is paid after you show that you have incurred the cost to complete them.

In most cases, this requires:

• Entering into a contract to perform repairs
• Completing the repairs, or at minimum incurring the cost
• Submitting documentation to the insurance company

Once this information is provided, the adjuster should release the withheld depreciation to bring your payment up to the full replacement cost value.

What You Must Provide

To trigger payment, you should be prepared to submit:

• Executed repair contracts
• Invoices and receipts
• Proof of payment
• Photographs showing completed repairs
• Written communication requesting release of depreciation

Where Claims Break Down

This is where most problems arise:

• Repairs Are Not Completed: If repairs are not performed, the insurance company may not release the depreciation.
• Costs Are Not Incurred: Some policies require that you actually pay for the expense, not just incur it.
• Documentation Is Incomplete: Missing or unclear documentation can delay or prevent payment.
• Deadlines Are Missed: Policies often impose strict time limits to complete repairs and request depreciation.
• Payment Is Delayed or Disputed: Even when everything is submitted, insurers may delay or challenge the amount owed.

Strategic Insight

Withheld depreciation is not extra money. It is part of the coverage you already paid for.

However, it is conditional, and the burden is on you to meet the insurance policy conditions. Insurance companies rely on policyholders failing to complete this process.

1. Know Your Policy Requirements

Review the Loss Settlement and Loss Payment provisions carefully.

2. Start the Process Early

Do not delay repairs or documentation. Time limits matter.

3. Keep Detailed Records

Maintain organized records of all contracts, invoices, and payments.

4. Submit a Clear, Complete Package

Provide all documentation together with a written request for release of depreciation.

5. Follow Up

If payment is not issued promptly, do not assume it is being processed. Follow up and demand a response.

Final Takeaway

Withheld depreciation is paid only after you comply with your policy requirements.

If you:

• Complete the repairs
• Incur the costs
• Provide proper documentation

You should receive the remaining funds owed under your policy. If you do not, give us a call to allow us to review your situation for you.