Homeowners Insurance and Your Roof
Of the many parts that make up your home, the roof arguably receives the most direct exposure to the elements. In the Midwest we see a little bit of every kind of weather from extreme heat and humidity to hail and tornadoes to ice and even the occasional heavy snow. The Oklahoma wind can cause devastating damage any time of year, causing trees to break and debris to be thrown around. These extreme weather conditions can wreak havoc on your roof. The good news is that most insurance companies consider the roof an integral part of the structure of your home. The dwelling coverage section of your homeowners’ policy typically protects your home from these weather hazards. Depending on the extent of damage caused by Mother Nature the homeowner may qualify for either a total or partial roof replacement.
If you are shopping for insurance or questioning if you should file a claim, we have some helpful information for you.
Understanding Your Insurance Policy as it Applies to Your Roof
Ask your agent questions and make sure you understand what your insurance policy will cover and will not cover. There are several forms of homeowner’s insurance that have become standardized in the industry. These forms are designated HO-1 through HO-8 and they each offer varying levels of protection depending on the homeowner’s needs and the type of residence being covered. HO-3 being the most common and HO-5 providing the broadest coverage.
A key decision that you will need to make is choosing coverage that will pay either the actual cash value (ACV) or the replacement cost value (RCV) of your items. Most homeowners have either an ACV or RCV policy.
Actual Cash Value (ACV)
These policies typically have lower premiums than RCV policies but provide less in compensation when you file a claim. Essentially it is the cost to replace the item with new, like kind and quality, less depreciation. Insurers calculate depreciation using the age of the item and the amount of wear and tear it suffered while in your possession. These types of policies often leave the homeowner short on the actual cost of replacing their roof.
Replacement Cost Value (RCV)
Replacement cost value policies ensure that you will receive the full amount necessary to replace the damaged items with like kind and quality.
The difference between these two policies to homeowners can amount to several thousands of dollars out of pocket. For example: a shingle that has a thirty-year warranty and is ten years old will have a depreciation ratio of 10/30. The formulated depreciation amount is subtracted from the RCV to reach the Actual Cash Value (ACV). If you have an RCV policy, the depreciation that is retained by the insurance company will be issued to you after the replacement of your damaged items is complete. If you have an ACV policy the depreciation that is retained by the insurance company is non-recoverable and you will not be issued this amount.
Declarations
One of the most important pieces of your policy is the declaration page. Your home insurance policy’s declaration page will list your coverages and the maximum amount allowed for reimbursed for property loss; whether it’s for an item’s Replacement Cost Value (RCV) or Actual Cash Value (ACV). For example, a storm comes through and destroys your roof that was put on only two years ago. The paperwork from the roof replacement shows that the invoice price was $12,000. When you are filling out your claim form, you will list the roof’s $12,000 purchase price. You expect to be reimbursed for that amount. If the settlement terms in your policy are for Replacement Cost Value (RCV), then this is what you can expect to be paid. However, if your claim settlement terms are for an item’s Actual Cash Value (ACV) your settlement will be less than the $12,000 originally paid for the roof. The ACV policy will only reimburse you for the roof’s replacement cost after two years of depreciation; or after wear and tear has been reduced from the value. If your insurance company determines that two years of use reduced the roof’s value by $1,500 then your settlement would be $10,500 less your deductible.
Building Code
Another item to consider is changes to the International Building Code and local Building code updates. If you roof is damaged or destroyed, you may be required to rebuild while meeting current building codes in your area that may differ from when your home was built or last renovated. This may include metal drip edge, decking and ice and water shield. Unless your policy specifically states otherwise, Most ACV and RCV polices do not cover the cost to implement enhanced building code requirements, leaving you with a gap in coverage. If you are worried about adding additional costs to your roofing project, consider building code upgrade coverage.
Deductibles
Choosing a higher deductible will usually reduce your premium. However, you carry more of the financial burden should you need to file a claim. You may have some contractors that offer to waive or give you a coupon/credit or even absorb your deductible. While it is not against the law (at least for now, Texas recently passed a law and other states are expected to follow) to“waive” the deductible there could be other legal ramifications between you and your insurance company. Your insurance policy is essentially a contract between the homeowner and the insurance company. Most insurance companies require a final invoice once work is completed before they issue final payment. Please understand that under both ACV and RCV policies insurance is only required to pay you for the actual cost of repairs. Therefore, if your contractor is inflating the invoice to match insurance pricing this is considered fraud. For example: your contract is for 8000.00 the company waives your deductible which means that you will pay 7000.00 if the invoices shows 8000.00 you have committed fraud and may be in violation of your contract with the insurance company. Even if you pay the 8000.00 and the company cuts a check for 1000.00 this is considered dishonest and possibly fraudulent behavior that can put you in a situation in which your insurance does not have to pay you the recoverable depreciation.
The Fine Print
The fine print is where you may find stipulations, for replacement cost reimbursements. Certain parts of your home- such as your roof, or built-in appliances (ie: water heater or dishwasher) may need to meet certain criteria to be covered by their replacement cost. This can mean that your insurer has certain “life span” criteria, or it could simply mean they will not cover your roof for its replacement cost if it already has visible signs of wear and tear. If your insurer has restrictions on replacing your roof for its replacement cost, you will have to decide whether or not it is acceptable to be insured by the Actual Cash Value, or if you’d rather replace these particular items up front and be fully covered. Some insurers have endorsements that you can add to your policy. These endorsements can cover your roof’s replacement cost regardless of its age or condition. We recommend contacting your insurance agent to review your policy to see what options you may have. It is wise to be informed and equipped with the best suited policy before a disaster hits and you are left scrambling to pay for a new roof.
Damage Assessment
Once you understand your insurance policy coverage you will be set to take the necessary steps to have your roof assessed for damage. If you suspect that your roof sustained damage from weather elements - you want to hire a reputable contractor for a professional inspection. We have provided helpful tips for what to look for when hiring a reputable contractor in another blog. Take the time to read through this blog before hiring your roofing contractor. Most roofing estimators will give you an estimate that you can use to file with your claim. It is important to keep in mind that some policies have time limits for filing claims from the “date of loss.”
Have all pertinent details and relevant paperwork ready and contact your insurance company. They will help lead you through their claim’s procedures. Once a claim is officially filed an adjuster will be assigned, notified, and dispatched to inspect your roof. There are many factors that your insurance company will consider when inspecting your roof. In general, an adjuster may assess the age of the roof, proper installation, missing or broken shingles, areas of wear or sun damage, damages from trees near the roof, nails pops and normal problems that may arise.
Once your insurance company has accepted the claim, they will make an offer to cover repair/replacement of your roof. If the quote that your roofing contractor provided is significantly higher than the estimate that the insurance proposes - the insurance paperwork would need to be audited to see if they missed items that are due to you.
How We Can Help You
Elliott Roofing has 40 years of experience working with insurance claims and damaged roofs. We are pleased to share our expertise and will gladly work as your liaison to help you navigate the claim process with your insurance company.