Claims Adjuster Practice Exam 2025 - Free Claims Adjuster Practice Questions and Study Guide

Withheld depreciation refers to a portion of the claim payment that is not immediately released to the policyholder. This amount is typically held back by the insurance company to account for the expected depreciation of damaged or lost property over time. The reason this portion is retained is to ensure that the insurer is only paying the actual cash value of the lost or damaged items—this includes their depreciated value rather than the replacement cost.

In many cases, when a policyholder files a claim for damages, they may receive an initial payment that covers the immediate costs, minus the withheld depreciation. Once the policyholder has had the opportunity to replace or repair the items, they can often claim the withheld portion by submitting proof of the repairs or replacements. This process emphasizes how the insurer protects its financial interests by ensuring payouts reflect the true current value of the property involved in the claim.

The other options relate to different concepts that do not accurately depict what withheld depreciation entails. For instance, it is not specific to health insurance, it isn't a penalty for late claims, nor is it solely applicable to partial losses, which clarifies why these alternatives are not suitable definitions.