How does homeowners insurance come up with the depreciation amount on an actual cash value dwelling policy?
January 27, 2010
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MTR 8:04 am on January 28, 2010 Permalink
There are a number of publications, including several from the IRS which provide the information. Generally, however, the computerized systems we use will average out the depreciation based on age. EX: A building has a life expectancy of 100 years (normally). if it’s 25 years old, there is 25% depreciation. In some states (mine) we only depreciate materials, as labor doesn’t depreciate. I think, however, that is different from state to state depending on the laws. If they are depreciating the dwelling itself, it’s usually based on age (but there is a maximum amount, as obviously it won’t depreciate past a certain point no matter how old it is, if you can still live in it.
Hope that helps