Depreciation is a measure of age and condition, with a given lifetime.
It may be referred to as a value (in dollars), or a percentage, or a number of years. However expressed, "depreciation" accounts for the difference between what something cost, new, and what it might be worth, now. Commonly, for insurance claims, the calculation determines the difference between current replacement cost and current value.
Why is depreciation important? Because, in the end, an insurance policy may only pay you current value or depreciated value for a damaged thing, as part of a residential or commercial property claim, a claim from an automobile wreck, or from a contents claim after a hurricane, fire or flood.
A typical policy might use the phrase: "Actual Cash Value" ("ACV") as part of the language describing how the claim is settled. One method of estimating "Actual Cash Value" uses current replacement cost less the depreciation.
Most common things wear out over time -- that amount of time is that thing's lifetime.
Salvage value - What it's worth, now that it is useless . . .
What is Actual Cash Value , and how is it estimated or calculated for insurance claims
For more information on how to prepare for an insurance claim, or assistance in the adjustment of insurance claims, please contact John Ruskin at the address or phone number, below.