What You Need to Know About Roofs and Homeowner’s Insurance
By: Matt Spanton, President of Commercial & Strategic Growth at RAFTRx
Securing home insurance is a crucial aspect of homeownership. If something happens to your property, you want to ensure you have sufficient protection and coverage to make necessary repairs. The complexity arises in determining how much coverage you need and what fits your budget. Many insurance companies are starting to adjust what they will cover due to changes in extreme weather patterns. In simple terms, not all homeowners’ policies are the same, and it’s essential to understand what your policy does or does not cover concerning your roof (or any part of your home, for that matter).
A Tale of Two Policies
When it comes to roof coverage, there are two types of policies:
- Recoverable Cost Value (RCV)
- Actual Cash Value (ACV)
Both policies are designed to help you cover repair costs resulting from an accident or natural disaster, but the key difference lies in their coverage. RCV policies cover the full cost of roof repair or replacement, while ACV policies only compensate you for the estimated value of your roof at the time of damage. The trade-off is that RCV policies tend to come with higher premiums and deductibles compared to ACVs. However, if you ever need to file a claim, ACVs will leave you with significantly more out-of-pocket expenses.
RCV and ACV in Action
Need a better idea of what these policies look like in the real world? Let’s take a look at the following scenario.
Your roof was installed 12 years ago and cost $20,000. You’ve kept it inspected and well-maintained, but then a tree fell on your house in a severe thunderstorm.
With an ACV policy…
Your insurance company will look at your roof’s original cost and apply a depreciation rate to that value. The older your roof is, the less money you receive. Let’s say the rate is $1,000 a year. At 12 years old, that’s $12,000 less than what you originally paid, leaving you with a total payout of $8,000.
The total cost of replacing your roof with the same materials as before is $32,000, which means your out-of-pocket costs will be $24,000.
With an RCV policy…
Your insurance company will still apply a depreciation rate to your roof and pay you the initial valuation of $8,000. However, once you’ve completed the repairs and submitted a claim that verifies the work was done, they will pay you the remaining $12,000 to cover the original cost of your roof along with an additional $12,000 for increased expenses.
This brings your total out-of-pocket costs to a grand total of $0.
Know About Limitations and Exclusions
Of course, this is a simplification of a very complicated process. Policies can have clauses that cover some types of damage but exclude others. For example, some policies exclude damage from wind or hurricanes, especially in areas more prone to natural disasters. There are also instances of cosmetic exclusions, where the damage is not covered if it only affects the appearance of the home but not its function.
These are only a few examples of the exceptions that can be included in your homeowner’s insurance policy, which is why you must always read your policy carefully.
Where Do Roof Warranties Fit In?
There are several types of roof warranties, including manufacturer’s warranties, contractor warranties, and even “lifetime” warranties. These warranties cover faults in materials or poor installation and ensure that the materials will last a specific duration. However, they do not cover damages caused by accidents or storms.
About to Renew Your Policy? Here’s What You Need to Keep in Mind.
Like most insurance policies, your coverage renews annually. And, like many people, you likely sign the documents and pay the bill without giving it much thought. However, it’s important to review your policy documents carefully. Legally, insurance providers must inform you when they make changes to your policy, whether that involves a change in coverage or modifications to premiums.
Before you renew, make sure your policy still meets your home’s needs. If you have questions about changes, contact your insurance provider.
Changes in the Insurance Industry
Across the U.S., homeowners and communities are facing an increase in severe weather, ranging from blizzards and tornadoes to hurricanes and hailstorms. Homeowners’ insurance is designed to offer financial protection in the event of damage from these naturally occurring events. However, the rise in severe weather has also resulted in an increase in claims, causing insurance providers to raise their prices to cover the costs.
One change in the roofing industry is that insurance companies are less willing to extend coverage to roofs past a certain age. This has made it more difficult for people to buy and sell homes.
The best way to stay informed about your coverage is to understand your policy and maintain your roof regularly. The certified roofing contractors at RAFTRx are here to assist you. Contact us today to schedule a free inspection and find out what’s happening above your head.