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How Depreciation Works on Insurance Contents Claims

Depreciation reduces replacement cost to reflect age against the expected useful life of the item's class — subject to the policy and the jurisdiction.

Kevin Godfrey, KevinLast updated 3 October 2026

How does depreciation work on a contents claim?

The item's class gives it a useful life, the age gives a percentage of that life used up, and that percentage comes off the replacement cost to produce actual cash value.

The arithmetic is simple and the inputs are where the work is: which class an item belongs to, and how long the insured owned it. Get those two right and the rest is division. Get the class wrong and a five-year-old sofa depreciates like a five-year-old pair of shoes.

RCV and ACV, on one line

How a line foots, left to right
ColumnWhat it is
Unit costThe replacement price of one unit, from a single listing
Ext. costUnit cost × quantity
Sales taxApplied per line, from the loss address, not only as a claim total
RCV + taxExt. cost plus that tax — the replacement cost value of the line
AgeYears the insured owned it, printed as a bare number
% Depr.Age ÷ useful life for the class, to a maximum of 100%
$ Depr.The percentage applied to RCV + tax
ACVRCV + tax − $ Depr.

Depreciation applies to the tax-inclusive replacement cost, so tax is inside the ACV figure rather than added after it.

Why the category decides the answer

Kevin's schedule carries 31 categories and 87 sub-lines, which exists because "clothing" is not one useful life. A sample, read from the live schedule:

Useful life by sub-line, from Kevin's schedule on 3 October 2026
Sub-lineUseful lifeNote
Clothing — underwear & nightwear3 years
Clothing — footwear, non-athletic5 years
Clothing — all other8 years
Furniture — upholstered10 years
Furniture — all other20 years
Appliances, major — refrigerator14 years
Music, movies & media — DVDs8 yearsThe one capped line: 50% maximum
Jewelry — costume & children’s watches10 years
Jewelry — watches, brooches, pins20 years
Jewelry — all otherNo useful lifeAppraisal-based
Clothing — fursNo useful lifeAppraisal-based
Firearms — all20 yearsAge-based, flagged for appraisal

It runs all the way to 100%

That answer is uncomfortable and correct. A seven-year-old set of bedsheets in a three-year class has no actual cash value left, and a schedule that clamped it at 90% to seem fairer would produce a number the arithmetic cannot justify. Kevin renders the answer the schedule gives, including $0.00.

Age is ownership-relative

The question is how long this insured had the item, not how old the design is. A six-year-old model bought last year is one year old on the claim. Items land from processing at age 0 — meaning ACV equals RCV until somebody enters an age — which is deliberate: an unentered age is visible, where a guessed one is not.

Where the calculation happens

Server-side, every time. Changing a class or an age sends the line back for recalculation and the cell shows a pending state until the answer returns. The interface never computes depreciation itself, because two implementations of the same rounding eventually disagree — and the one that disagrees in public is the exported worksheet sitting on a carrier's desk.

The caveat that matters

Depreciation on an actual claim is subject to the policy language and the jurisdiction. Recoverable depreciation may be payable after replacement; some policies and some states treat categories differently. Kevin produces a defensible schedule and the evidence under it. It does not decide coverage.

Common questions

How is depreciation calculated on a contents claim?
Straight-line by default: the percentage is the item’s age divided by the useful life for its class. A 5-year-old item in a 10-year class depreciates 50%. Kevin applies that to the tax-inclusive replacement cost of the line and subtracts it to give actual cash value.
Can depreciation reach 100%?
Yes. Property past its useful life depreciates fully and shows an actual cash value of $0.00. There is no salvage floor in the schedule — 86 of the 87 lines carry no cap at all, and the one that does caps at 50%. A figure clamped at 90% to look reasonable would be a figure nobody could reconcile.
Does age mean how old the model is?
No — how long the insured owned it. A television bought second-hand two years ago is two years old for this purpose, whatever year the model was released. That is the number the schedule expects.
Why does the category matter so much?
Because useful life is a property of the category, and the categories differ enormously: underwear and nightwear run 3 years, non-athletic footwear 5, most other clothing 8, upholstered furniture 10, a refrigerator 14, and most other furniture 20. The same age produces wildly different depreciation depending on which line the item sits on.
Are any classes excluded from automatic depreciation?
Furs and jewelry other than costume pieces and watches have no useful life in the schedule — they are appraisal-based. Costume jewelry (10 years), watches (20) and firearms (20) are ordinary age-based lines, though firearms are flagged for appraisal. Separately, jewelry, fine arts, firearms and furs are never automatically priced.
Is this the final word on what a claim pays?
No. Depreciation is subject to the policy and the jurisdiction, and recoverable depreciation may be payable once the property is replaced. Kevin computes a schedule; it does not make a coverage determination.

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