Depreciation Insurance
What Does Depreciation Insurance Mean?
Depreciation insurance, also known as zero depreciation coverage, is a provision in a property insurance policy that covers the actual cash value of the property before any loss in value due to depreciation over time. This type of coverage disregards the decreased value of the property resulting from factors such as market depreciation, damage, or wear and tear.
Insuranceopedia Explains Depreciation Insurance
Most properties lose value over time; for example, a used car is not as valuable as a new one, and real estate prices can decline, reducing a property’s worth.
With a policy that includes depreciation coverage, there is no deduction for these factors, meaning the policy will pay out an amount equal to what the insured originally paid to purchase the property.
However, the downside to this coverage is that due to higher payouts and increased risk to the insurance company, the premiums for this type of policy are generally higher.
