We’re making a home insurance claim on some electronics that were damaged in a leak. These electronics were very expensive. We bought them a year ago for $16,000, but in the early 2000s, this type of equipment was worth $500,000. The insurance company says the equipment is 14 years old and is depreciating it using the current market value.
Since we bought it used, the price we paid already reflected some depreciation. Shouldn’t the depreciation be calculated from when we bought it a year ago, if they’re using the price we paid? I’m struggling to articulate this, but I think they may have miscalculated the depreciation. If they want to depreciate it as 14 years old, shouldn’t they value it at the price it was 14 years ago?
Does the depreciation formula work the same for items purchased new versus items purchased used?