Plain-English meaning
A loss-settlement approach that generally accounts for depreciation when valuing damaged property.
Why it matters
It can produce a lower payment than replacement-cost settlement for older items or materials.
Where you may see it
Declarations, property-coverage conditions, roof endorsements, and claim estimates.
What to verify
Which property uses this method, how depreciation is calculated, and whether replacement-cost benefits can be recovered later.
Do not confuse it with
Market value, which reflects what property could sell for, and replacement cost, which focuses on replacing or rebuilding.
For policy-specific meaning, read the definition and related provision in the issued policy.