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No depreciation in home's insurance? Look again
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But that's where it gets tricky.

Most replacement-cost homeowners policies today include a "recoverable depreciation" clause, allowing the insurer to hold back a portion of the proceeds until you prove your repairs (or replacement) are complete.

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Why they do it
It's more than just a bureaucratic hurdle, says Don Griffin, a vice president at Property Casualty Insurers of America. Requiring you to prove the television was actually replaced, or that a damaged roof was actually fixed protects the interest of everyone involved, he says. "This is actually done to protect a lot of people. It protects the mortgage company, it protects the insurance company, and yes, it even protects the insured."

But Howard disagrees. "It makes policy holders jump through hoops," he says. Being required to file receipts and proving the work is actually being done is really about making you prove your endurance and dedication, he says. "For the insurance company, it is really quite effective. People get worn out and stop pursuing it. Other people just don't replace it, and then they are out of luck and don't get the full benefit their policy guarantees them."

And when the insurance company doesn't have to issue that second check, Howard contends, they can pocket that money.

But Griffin maintains that a more hands-off approach might encourage people to try to cheat the system.

"The last thing an insurer wants is for a homeowner to pocket the cash without making repairs, and then a second claim down the road comes along and the insurer is stuck paying the claim again, but this time for pre-existing damage."

Griffin says the insurance company could very well decline coverage on something months or years later if they don't have proof the original repairs were made.

"What it really does is it keeps you from taking the cash and running," Griffin says.

What it all means
The bottom line is that if you have a replacement cost policy and your insurer applied depreciation to your claim, you have some more work ahead of you after your repairs are done.

A typical claim would work like this: Say you have a replacement cost policy and a pipe breaks in your house, ruining everything on the first floor.

The insurance company would send an adjuster to your house and assess the cost to repair the damage and replace everything that got ruined.

The adjuster sends the report to the insurer, who then reviews the report and sends you a check.

Along with that check the insurer will send an itemized list detailing how they came to the bottom line. If the total includes depreciation, start saving your receipts.

Howard suggests using the first check to begin making repairs on the most crucial portions of your home. As those repairs progress, send a batch of receipts to your insurer for a second check and then begin a second round of repairs.

Working in waves ensures you don't have to front the money for repairs out of your own savings account.

One common misconception that surfaced after Hurricane Katrina roared ashore was a concern that once a homeowner cashed a settlement check, they waived all rights to pursue further reimbursements.

Next: "Don't drag your feet if filing a depreciation claim"
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