Insurance has always been meant to put you back into the same position you were, pre-loss. In some situations you may come out better than you were, because when you repair or replace something generally you can’t (or don’t) replace it with something aged/used like what you had. Usually it’s replaced with something brand new.

 

This is especially true with roofs. Roofs wear out as they age. That’s just a function of being exposed to sun, heat, wind, rain, and the elements consistently for many years. As a result, if your roof is damaged and has to be replaced, you are going to be in a better spot than you were because your brand-new roof will last longer than your prior “used” roof.

 

Because of this, and a combination of many other factors, there becomes a bit of a moral hazard as it pertains to filing claims for older roofs since you actually are better off having a claim than not having a claim (since your roof was in need of replacement soon anyhow).  

 

In order to keep rates down and deal with this moral hazard (and the subsequent gaming of the system, by unscrupulous roofers, and a small percentage of homeowners) many companies have begun writing policies which pay roofs on a depreciated value schedule. Generally, that depreciated value schedule only applies when the roof is damaged by either windstorm or hail. That would include all windstorms meaning hurricanes, tropical storms, tropical depressions, or anything similar.

 

Actual cash value loss settlement, which includes a roof value schedule, is a way the insurance carrier can determine the cash value of a roof while removing the subjective aspect of figuring out EXACTLY how depreciated the roof is. Instead of an adjuster, looking at the roof and making a judgment call as to how much life is remaining, or how much it has depreciated, with a roof payment schedule they simply determine the replacement cost and multiply that by a predetermined percentage based on the age of the roof. This way, the only value that has to be determined is, what does it cost to replace it? The depreciation value is predetermined and not subject to a subjective ‘judgment call’. As a matter of fact, I wish Auto Insurance companies did this. It would make my life much easier if they would simply take a fixed depreciation percentage (based on age and mileage or something similarly simple) from the actual replacement of a totaled car with a brand new one instead of jumping through all the hurdles to determine the ‘cash value’ based on exact depreciation, value, etc. But I digress...

 

The really good news about these ‘cash value’/’roof surface payment schedule’ endorsements is they ONLY apply depreciation when the damage occurs because of windstorm (including hurricane, tornado, tropical storm/depression, etc.) or hail. In other words, if you have an attic, fire, or a tree limb breaks and smashes through your roof, or someone drives their F350 into your house, or anything that isn’t wind or hail…. the roof would be paid for at full replaced without a reduction for depreciation. 

 

Additionally, even if it is wind, hail, hurricane, etc., that damages your roof, there is no reduction for depreciation if the roof can be repaired for less than it could be replaced, minus depreciation. Meaning, if the cost to replace the singles on the one slope of your house that was damaged is less than the depreciated value of total replacement (determined by the roof surface payment schedule) you would be paid based on the full repair value. In that situation, you would only be subject to your deductible.

 

The goal with all of this is to pay the full replacement when a completely unforeseen situation happens (think house fire), but not pay for a total replacement of a roof which is nearly worn out. A 50 mile an hour wind doesn’t generally damage a new roof, whereas that same 50 mile an hour wind might tear half the shingles off of a home with a roof that is 23 years old simply because the tar has deteriorated, the granules have come off making it lighter and easier to lift, etc. 

 

Owning a home comes with many large expenses that are not covered by insurance. Your hot water heater gets old and needs replacement. Your HVAC goes out. Your exterior paint begins to peel. Your driveway cracks overtime. Your roof gets worn out over time. All of these things are considered maintenance of the home and predictable expenses and not intended to be covered by insurance. This endorsement is the best way insurance companies can make sure they keep rates down by only paying for unforeseen sudden and accidental losses instead of becoming a policy (a significantly more expensive one) that pays for expected maintenance. 

As always, please do not rely solely on this general guidance for making an insurance decision. You should consult your agent, carrier, and/or attorney and get specific guidance on your specific situation before making a decision.

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See below for an example of the Actual Cash Value roof endorsement for American Integrity.Here are my footnotes that go with it.

 

1. Pays WITHOUT DEDUCTION FOR DEPRECIATION for “COST TO REPAIR” parts of roof surface damaged by wind-storm or hail. 

2. NO coverage for ordinance or law expenses. Meaning, if you have to add nails to your existing decking, or a different underlayment, or upgrade your roof to comply with current codes, there is no money for that. 

3. You do have to notify the insurance company by the end of your policy period (or up to 90 days if your policy ends within 90 days of replacement) or they will NOT pay based on full replacement and instead they will pay damages based on the PRIOR ACV schedule. 

4. Tells you EXACTLY the deduction for depreciation they will apply to the actual cost of replacement in a claim. In other words, 

5. If you have a shingle roof that is 15 years old, you should begin contemplating replacement. When you call and get an estimate for a roof replacement and it comes to $20,000, you’d multiply that by .4 (40%) and that will tell you how much they will pay, which comes to $8,000 minus your applicable deductible. 

 

Final notes and examples:

Not all roof value schedules are identical, so make sure you read the wording, and compare the schedules to one another when making a decision on which insurance company and policy to purchase. 

 

Also, be aware that if you have a standard hurricane deductible of 2% of your dwelling, when your shingle roof gets to be 14+ years old, there is a REALLY good chance damage to your roof from a hurricane may be completely under your deductible. For example, if you have a $400,000 house, and you get a roof replacement estimate for $20,000 - the payment using the roof value schedule would be $8,000. Your hurricane deductible in this scenario would be 2% of $400,000, which is also $8000, so there would be no payment from the homeowner’s insurance company if there was no additional damage to your home OTHER than the roof.