Replacement vs. Actual Cash Value on your Roof. This could be very eye opening!

Half of consumers purchasing home insurance don’t dig very deeply into the fine print of their policy. Granted, they place confidence in their agent or company to tell them if they need to know something important about the policy that doesn’t stand out with BIG BOLD letters. However, many times insurance companies or agents representing them fail to bring to light an endorsement that could literally cost you $10,000 or more.

Depreciated loss settlement (endorsement) also known as actual cash value (ACV) roof credit changes your claim payout on your roof specifically from one that pays to replace the entire roof to one that pays only a portion of the roof. The amount paid on the actual cash value is dependent upon the age of the roof. There is a schedule that you have in your policy that shows you what percentage you will get for your shingle, metal, or tile roof depending on how old it is. Let’s illustrate this point:

Steve has a replacement policy on his roof with company ABC and he carries a 1% wind/hail deductible on his $500,000 home.  The house was built in 2006 so the original roof is 15 years old. Hail strikes John’s home causing a great deal of damage to the roof. The insurance company agrees with the roofer that the cost to replace the shingle roof will be $17,000. After John’s 1% deductible ($5,000), he nets $12,000 to pay the roofer for his new roof.

Steve’s next door neighbor Bob doesn’t realize that he has an ACV roof credit/depreciated roof claim schedule on his policy with company XYV. Their houses, coverage limits, and deductibles are similar. When Bob’s adjuster comes over to look at the roof damage, he lets Bob know that based on a 15 year old shingle roof, he will only be able to get 40% of the value of the roof.  The adjuster depreciates the roofer’s bid of $17,000 by 60% which equals $6,800 and subtracts out Bob’s deductible of $5,000. The adjuster writes Bob a check for $1,800 to replace a $17,000 roof. Bob is not happy with his agent or his company.

So many times today, we see these endorsements on competitor’s policies and the client coming to us has no idea. In some cases, the client knows all too well which is why they are coming to us! In any event, it is extremely important that you speak with your agent to confirm if you have replacement coverage or depreciated loss settlement for the roof on your policy. You can have a replacement policy on your home that does not include replacement policy on your roof so be very specific when asking. Of course, we are always happy to review your policy at Barouh Insurance.

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