On a replacement cost policy the first payment is the replacement cost minus depreciation minus your deductible, and the withheld depreciation is released only after the work is completed and the final invoice is submitted. A homeowner who never submits the final invoice never receives it, and the carrier keeps it. On an actual cash value policy the depreciation is never released at all.
The two payments
A homeowner who receives the first payment on a large estimate and assumes they were underpaid may simply have been paid in a sequence and stopped after step one. The full explanation, including when depreciation is not recoverable.
Questions
How do I calculate recoverable depreciation?
Take the replacement cost value on the estimate, subtract the depreciation shown, and subtract your deductible. That is the actual cash value first payment. The depreciation figure itself is the recoverable depreciation, released after the work is completed and the final invoice is submitted to the carrier, provided your policy settles on a replacement cost basis.
How do I claim my recoverable depreciation?
Complete the work, then send the contractor's final invoice and proof of payment to the carrier with your claim number and a written request for release of the withheld recoverable depreciation. Carriers do not usually volunteer it. If the final cost exceeded the estimate because of conditions found once the work started, request a supplement for that difference at the same time.