Insurance term
Depreciation
Depreciation is the decrease in an item's value over time because of age, wear and tear, or obsolescence. In property insurance, depreciation may be used to reduce the amount paid for a covered loss, especially when a policy pays actual cash value instead of replacement cost.
Example
After a 10-year-old roof is damaged in a storm, the insurer may subtract depreciation from the claim payment if the policy pays actual cash value.
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