Your Roof Is Covered By Your Property Insurance; Is It An ACV or RCV Policy?

The majority of homeowners carry property insurance, yet very few individuals fully comprehend the specifics of their coverage. In reality, the majority of homeowners we talk with are unaware of the distinction between ACV and RCV insurance, and this lack of knowledge cost them thousands of dollars when it came time to replace their roofs. Suppose you are preparing to renew your homeowner's insurance policy or are contemplating the purchase of a new policy. In that case, we have some advice regarding roof coverage that will help you pay less out of pocket while replacing your roof.

RCV Vs. ACV

Consequently, what are RCV and ACV in relation to your property insurance, and why is it significant? Replacement Cost Value (RCV) refers to a policy that covers the complete cost of replacing a home's roof minus the policy's deductible and any limitations. With RCV coverage and a contractor that has an eye for detail and expertise working with insurance claims, you can have your roof completely replaced with minimal out-of-pocket costs. Indeed, this is the reason why we pay monthly premiums!

Actual Cash Value (ACV) policies, on the other hand, factor in the total cost to replace your roof but deduct depreciation, your deductible, and any exclusions. Considering that most asphalt shingle roofs have a 25 to 30 years lifespan, with some accessories lasting far less, a few years can significantly reduce the total insurance claim. For instance, if your roof has a 30-year lifespan and is 15 years old, the insurance company will deduct approximately 50% of the replacement cost due to depreciation. After considering deductibles and exclusions, this leaves the homeowner accountable for paying more than 50% of the entire claim.

When you receive your claim for an RCV policy, depreciation will also be subtracted from the total. However, depreciation on an RCV claim is recoverable, meaning that you can reclaim the full amount as long as the paid-for service has been done. With an ACV policy, depreciation cannot be recovered regardless of whether the work is completed. If you reside in a region prone to damage covered by an RCV policy, it will save you a large amount of money in the long term, despite the higher premiums.

Ordinance or Statute Protection

Generally, an authorized claim will pay to restore the home to its former condition previous to the occurrence of the covered damage. What if, however, you are unable to restore the home to its previous state due to a change in municipal regulations? Herein lies the significance of Ordinance or Law coverage, often known as Code Upgrades.

Every few years, municipalities make changes to their rules, which can have significant effects on homeowners. The majority of towns have adopted a version of the International Roofing Code, together with local amendments containing inspection-specific criteria. When your roof was last replaced, the new regulations were likely not in effect. If you did not have an Ordinance or Law Coverage, you would be liable for paying for these necessary code updates.

Code enhancements like ice barriers, impact-resistant shingles, flashing standards, etc., can add thousands of dollars to your claim. As long as your policy contains Ordinances or Law Coverage, your insurance provider is liable for covering these expenditures, regardless of whether they were present on the property beforehand or not.

Small Deductible

Prior to submitting a claim, it is essential to be aware of the amount of your deductible, as it is a requirement of every homeowner's insurance policy. Some property insurance deductibles are a percentage of the total claim, as opposed to the standard $1,000-$2,500 flat premium. In certain storm-prone regions, certain types of damage, such as wind or hurricane damage, may necessitate a percentage-based deductible, whereas other types of damage result in a flat rate deductible.

If you're not careful, both flat-rate and percentage-based deductibles can be costly. Even with an RCV policy, we have seen flat-rate deductibles that leave homeowners paying more than half the cost to rebuild their roofs, which is not something you want to discover after filing a claim.

Rapid Repairs

Although you may not need to include this directly in your policy, it is essential to be aware of it. Generally, your property insurance policy stipulates a timeframe during which damage must be reported and remedied. You may be responsible for the repair charges if you fail to submit a claim or fix the damage within the allotted time frame.

The longer you wait to file a claim, the more probable it is that your insurance provider would attribute any damage to earlier damage or normal wear and tear, neither of which is covered by a regular property insurance policy.

In addition, we have witnessed homeowners submit claims and spend the money instead of making repairs. In addition to this being an example of insurance fraud, the damage remains. In fact, the damage is likely to worsen, and when repairs are ultimately required, the overall cost is frequently significantly greater than the first estimate. Since the initial damage was not fixed, the homeowner would be responsible for the total cost of repairs in this instance.

Suppose circumstances prevent you from completing repairs in a timely manner. In that case, it is still preferable to make a claim since you can request (in writing) additional time to engage a contractor to repair the damage.

Conclusion

If you are paying monthly premiums for property insurance, you should not be responsible for the majority of the expense associated with replacing your roof. Each individual's circumstances are unique; therefore, one policy does not fit everyone. Calculate the difference between the increased premiums and the overall savings from more comprehensive coverage to ensure you are making the best selection for your unique circumstances. However, it is essential that you have the chance to do so based on all the considerations rather than selecting a policy based just on the premium cost, which is not necessarily an accurate indicator of the policy's quality.