Our Positions | Depreciation of Labor

While replacement cost policies provide coverage for the full cost to replace a covered loss, actual cash value policies, which typically cost significantly less, provide coverage for the value of the property at the time of loss, which is calculated as replacement cost less depreciation.

In some cases, regulators and courts have taken the position that depreciation should not include the cost of the labor expenses but only the cost of materials.

NAMIC Position

NAMIC believes that insurers should be able to able to provide actual cash value coverage that includes depreciation of labor costs. Ensuring that coverage is provided based on reasonably anticipated costs allows insurers to provide consumers with lower cost options when buying insurance.

NAMIC has supported the position that the cost of labor may be depreciated in calculating actual cash value in a number of amicus curiae briefs and has supported legislation responsive to contrary holdings by courts and regulators.

NAMIC News on Depreciation of Labor


Erin Collins
Senior Vice President - State and Policy Affairs