Every estimate carries three numbers. Replacement cost value, depreciation, and actual cash value. Xactimate will happily calculate all three for you, and it will happily calculate them wrong, because the software does not know what the policy says. Recoverable or not is a policy question, not an Xactimate setting. Get it backwards and the whole estimate reads wrong to the person whose job is to notice.
The three numbers, plainly
RCV is what it costs to replace the damaged item today. Depreciation is the value the item lost to age and wear. ACV is what is left, RCV minus depreciation. The first check payment is usually ACV. Whether the insured can ever collect the depreciation is the whole question.
Recoverable or non-recoverable is decided by the policy
On a replacement cost policy, depreciation is recoverable. The insured completes the repair, submits proof, and collects the holdback. On an ACV policy, or on an item the policy settles at ACV, the depreciation is non-recoverable. The insured is never getting that money, and the estimate has to say so honestly.
The trap is that the settlement basis can differ item by item on the same loss. A roof payment schedule endorsement can put the roof on ACV while the interior stays on replacement cost. Fencing and outbuildings are settled at ACV on plenty of forms. One claim, two settlement rules, and the toggle has to match on every line.
The toggle reports the policy. It does not decide it.
The line the reviewer flags
When a desk reviewer spot-checks your estimate, depreciation is one of the two or three numbers they check, because it is where the money moves. The flags are predictable.
- Depreciation marked recoverable on a roof the endorsement settles at ACV.
- Non-recoverable applied on a straight replacement cost policy, shorting the insured.
- Depreciation rates that ignore the item. A 3 year old architectural shingle depreciated like it was 20, or paint depreciated past its service life.
- Labor depreciation handled against state rules. Some states restrict depreciating labor, and carriers carry their own guidelines on top. Know the rule for the state you are deployed in, not the state you live in.
Any one of these tells the reviewer the settlement math cannot be trusted, and once they distrust the math, they reread the whole file looking for more.
Set it right in 60 seconds
This is another problem that dies on the dec page. Confirm the settlement basis for each coverage, find the roof endorsement if there is one, and set the depreciation switches to match before you write scope. Then put it in a note. “Dwelling settled RCV, roof settled ACV per endorsement, depreciation applied at age 12 years.” One sentence, and the number the reviewer was going to question is already explained.
Depreciation is where estimates quietly go wrong, because the software makes it feel automatic. It is not automatic. It is the policy, applied line by line. Read first, set the toggles to match, say what you did. That line stops getting flagged the day you start doing that.