When you file a claim for covered damages on an insured property, insurance policies may only pay for its actual cash value at the time. Once you repair or replace the damaged property, though, some policies will also pay for the difference between the replacement cost and the initial proceeds. That difference is the Recoverable depreciation.
Recoverable depreciation is the difference between an insured item’s actual cash value and its replacement cost value.
Actual cash value is the cost to replace your insured property minus deductions for depreciation. Depreciation is an item’s loss in value due to age and natural wear and tear.
Replacement Cost Value means your insurer would pay out the amount necessary to replace your lost or damaged property with a like-kind substitute. This amounts to the cash you’d need to purchase the same or similar item again, also minus your deductible.