When is depreciation considered non-recoverable?

Depreciation is deemed non-recoverable in situations where the insurance policy covers the actual cash value (ACV) at the time of loss. This means that in the event of a claim, the insurer assesses the property's value, factoring in depreciation due to wear and tear or obsolescence, rather than reimbursing for replacement costs. The insured receives compensation equal to the current market value of the property, which can be significantly lower than the replacement cost. This is crucial for policyholders to understand, as it directly affects their claim outcomes and financial recovery in case of incidents resulting in property damage.

Other options touch on scenarios that don’t align with the principle of non-recoverable depreciation. For instance, specifying a fixed value for depreciation is not standard practice in most insurance policies. In cases of total loss, typically, a policy would pay the full replacement cost rather than considering depreciation. Lastly, delays in repair timelines may complicate claims but do not dictate depreciation recoverability in the context defined by actual cash value coverage. Understanding these nuances helps ensure clarity in navigating insurance policy claims and implications on property depreciation.