A typical payment sequence

Order and timing vary by insurer and policy; this is a common pattern, not a rule.

After the estimate is agreed
First payment for the actual cash value: replacement cost minus depreciation and minus the deductible.
During the rebuild
Contractor draws are paid from that first check, often routed through the mortgage lender.
As supplements are approved
Additional payments arrive for added scope, sometimes with their own depreciation held back.
When work is complete
Proof of completion is sent: final invoice, photos, sometimes a signed completion form or final inspection.
After review
The insurer releases recoverable depreciation, and the contractor's final payment can be made.

Why the holdback matters to a rebuild

Depreciation reflects the age and condition of what was damaged. A twelve-year-old carpet or a fifteen-year-old roof is not worth what a new one costs, so the first check is reduced by that amount. Under a replacement cost policy, much of that reduction is usually recoverable, but only once the item is actually replaced.

In practice, that means the homeowner may be holding less money than the full rebuild costs until the job is done. Contractors know this and often structure their payment schedule around it, with the last draw timed to the depreciation release. Problems start when the final draw is due before the insurer has paid, or when work is finished but the paperwork to prove it is missing.

Some policies set a deadline for completing repairs to recover depreciation. Ask your adjuster whether one applies and when it ends, especially if permits or material lead times could stretch the project.

Paperwork insurers often want before releasing depreciation

  • Final itemized invoice that matches the approved estimate and supplements
  • Photos of completed work in each room on the claim
  • Final building permit sign-off where permits were required
  • Receipts for any owner-purchased materials included in the claim
  • A note of any items that were not replaced and why
  • Any completion form the insurer provides, signed as required

Common questions

Is depreciation recoverable on every policy?
No. Actual cash value policies generally do not pay it back. Check your declarations page or ask your agent which kind of coverage you have.
What if I choose not to rebuild something?
You may only receive the actual cash value for that item. Ask the adjuster before deciding.

General information for Littleton, not a quote or professional advice. In an emergency, call 911.