Roof Claims Explained: ACV vs Replacement Cost Coverage

– [Jeremy] Hey, this is Jeremy from Shine Insurance and today we're going to talk about roof claims Generally, that's wind or hail damage to your roof

We've got a ton of it going on in my area right now I deal with clients every day that are experiencing these kinds of claims So I wanted to create a video that just walked through it for you and helped you to understand your insurance policy and how it would respond Whether you're experiencing a roof claim right now or whether you just want to be prepared for when one happens So let's get this going here

Let's talk about first, what we will learn So we're going to talk first about why insurance companies have different rules for your roof than for the rest of your house It's actually set up in kind of a different way And then we'll talk about the three types of roof coverage The first being the best and that's Replacement Cost

The second, a little bit lesser, is Actual Cash Value And the third, that you really hope you don't have is no roof coverage at all We'll kind of look at all of those Let's start with a little known fact More than 40% of all homeowners insurance claims involve wind or hail damage to the exterior of your house

That could be your siding, that could be your gutters, but the vast majority of those claims involve your roof So insurance companies are motivated to limit their risk with specific coverage options for your roof Insurance companies know that they're going to spend a lot of money in claims for roofs and that's going to increase your premium, our premium for how much we pay for homeowners insurance And so sometimes they'll create a different kind of coverage that's specifically for the roof to try and mitigate their risk in this situation So they've created a completely different name for the kind of damage that usually happens to your roof and that name is right here

It's wind/hail coverage So if you look at your homeowner's policy there should be some reference to wind/hail coverage specifically And if it's not, you need to figure out what that is and where it is because almost every policy has wind/hail coverage separated out on the policy So let's start with wind, that is heavy movement of air like wind gusts, tornadoes, hurricanes, et cetera So especially if you live in Florida or somewhere like that wind coverage, super important because that includes hurricanes

The Midwest we have tornadoes and things of that nature But it can even be just high wind gusts that cause damage to your home Those do not include, by the way, your drunk uncle talking politics that might be a lot of wind, but not included on your homeowner's policy The second part of that is hail and those are frozen ice balls falling from the sky They could be the size of pennies, they could be the size of golf balls, they could even be the size of grapefruit, Texas had some of that recently

Hail is frozen ice balls falling from the sky So wind/hail coverage is what's going to specifically cover those two things Alright so let's start with a roof claim example A storm comes rolling in and oh, no, there's hail coming hitting your house It's starting to cause damage to your roof

Look at that damage, that's terrible I've never really seen a roof turn quite that bad, but a wind/hail storm comes through and suddenly you have a claim situation You have a roof that is damaged, in this case by hail, possibly by wind as well But you clearly have a situation So let's talk about who's going to become involved in this situation

The first person is you You the homeowner are going to be in the center of the claim situation making many decisions, figuring out how to solve this problems to take your roof from damaged to completely fixed The second one is the roofer, the contractor who's going to take care of your roof and actually do the work to fix your roof up And the third is the insurance adjuster The insurance company will put someone in charge of figuring out how to pay the claim for you and that's the insurance adjuster

So that's the individual who represents the insurance company in this situation So let's talk about the steps you're going to walk through Step 1, in my opinion, is to call a roofer Roofers are the specialists and they're going to be the one who can tell you what damage you're actually dealing with So, to me, I would call a local, well-known roofer that has a reputation in your town

There are absolutely fly-by-night roofers that roll in and knock on doors after hail claims, or hail storms and tell people they're happy to take care of it Those are not the people you want to work with They often don't use quality products There's nothing you can do if three months down the line you realize they didn't do the job well Now they've disappeared and you can't find them

So call a local, reputable roofer and have them come out and take a look Now, they might say one of a few things They might come out and say you know, I don't see any damage to your roof I don't think you have hail damage or wind damage in this situation They may say yeah, I see some hail damage

It's really bad like the roof in this example, clearly we've got major problems going on here And it will likely need to be replaced Or they could say, yeah, there's a small amount of damage I see it there Likely we're going to repair it So we might replace a few shingles or deal with a smaller repair rather than a complete replacement of your roof

So the roofer could give you a sense right off of is there any damage at all, is it a limited amount of damage, or is it likely that we're going to have to replace your roof So Step 1 is getting that estimate from your roofer Step 2 is starting the claim So this is kind of the parallel line You've got the contractor, the roofer, involved

The roofer is saying there's some damage that needs to be dealt with And so Step 2 is you're going to start an insurance claim You may call your insurance company directly, you may call your local independent agent like I am, and tell them the situation and make sure you have that claim What's going to happen first is they're going to give you a claim number which is what you refer to throughout the process So that's an important bit of information to have and they will likely schedule an insurance adjuster to come to your home

That adjuster is going to come out and take a look for themselves at the damage, what the extent of the damage is and what needs to be dealt with So that should happen second And then Step 3, you're going to have the insurance adjuster come out So let me give you a pro tip right here, super important, will help the process immensely, and it's really simply just be nice to your insurance adjuster This is a person who has serious power in this scenario

Most insurance adjusters are great people, have your best interests in mind, and are going to take good care of you, but in all things if we treat people nicely they are more likely to treat us nicely as well If we are combative with that person or treat them as if we distrust them we could have a different kind of experience So my advice, be nice to your insurance adjuster throughout the process, even if you disagree with something they say Okay, so you're definitely going to be nice to this adjuster Let's talk about what the possibilities are that the adjuster could say

The adjuster's first going to look at the damage to the roof and deem whether he or she agrees with the roofer Oftentimes the roofer and the adjuster don't agree and so you have to work through that But in this case let's just say that the adjuster agrees with the roofer It's going to cost $8,000 dollars to replace your roof Now, I need to throw in real quickly a part of your insurance policy that we're going to talk about as we go through the different options and that is your deductible

And all insurance policies have deductibles And a deductible is the portion of damage that you agree to pay to fix So you're agreeing that I will pay X amount and the most common homeowner's deductible is $1,000 dollars And that's the example we're going to use here I agree to pay $1,000 dollars of the damage and you as the insurance company are going to pay then what your responsibility is above and beyond that amount

So deductibles are incredibly important to understand as you're trying to understand your roof coverage So let's start with the worst coverage Well, that would just be no wind/hail coverage at all Your policy does not have coverage for wind or hail damage Very common in high hurricane areas like Florida, but common in other places as well

So it's super important that you check out your insurance policy and make sure that you actually do have wind/hail coverage If you don't have wind/hail coverage the cost to replace your roof is $8,000 dollars Insurance company, obviously is going to pay zero, you are going to pay $8,000 dollars It's kind of a bummer Hopefully, you have some coverage

So let's talk about the two different kinds of coverage that are there when you do have it And the first one is called ACV or Actual Cash Value coverage ACV coverage says your policy does have wind or hail coverage but the insurance company is going to factor in the age of your roof and subtract the amount they pay out based on the age of the roof So, in this example we have an $8,000 dollar fix The roofer's say it's going to cost $8,000 dollars to fix your roof

But let's say it's 10 years old The insurance company is going to say, well, that 10 year old roof is only actually worth $6,000 dollars, not the $8,000 dollars it's going to cost to replace And so they're only going to figure based on that $6,000 dollars plus they'll subtract your deductible from what they pay out A $1,000 dollar deductible is the example we're using here And in the end you end up paying three of that $8,000 dollars out of your own pocket to fix your roof

So ACV coverage has coverage and that's good In this example you've still got $5,000 dollars paid out from the insurance company, but it doesn't pay the entire replacement cost of the roof And so that can be a surprise to people and a real negative for folks Now, Replacement Cost Coverage is what you want to see on your insurance policy This says your policy has wind/hail coverage and the insurance company pays to replace it

Of course, minus the deductible which we've talked about already So in our example the cost to replace the roof is $8,000 dollars The insurance company is going to pay $8,000 dollars minus your $1,000 dollar deductible So they're going to pay $7,000 dollars, you're going to pay $1,000 dollars which is the best version of coverage for you Replacement Cost Coverage is what you want to have because they're going to pay to replace the roof no matter the age of your roof

So check your insurance policy out and make sure it has Replacement Cost Coverage Now, how is this going to happen? Step 4 is actually fixing the roof You've had the roofer come out, they said you had damage You had the adjuster come out, they talked about your insurance policy, told you exactly what kind of coverage you have and hopefully you had Replacement Cost Coverage and so we're going to get things fixed And so we're going to talk about how this gets paid out because it can be confusing to people and kind of, you feel like, what's going on here? So I'm going to make it real easy for you and lay it out

When the claim first starts the adjuster is going to give you money, a check, for the ACV value If you have ACV coverage that's all you're going to get But if you have Replacement Cost Coverage you say, wait a minute, the whole point of having Replacement Cost Coverage is to get the full amount to replace your roof minus the deductible But I got this ACV check, what gives? Well, the insurance company is trying to make sure that you actually use the money to replace the roof So they're incentivizing that process by holding back some of that replacement cost money and giving it to you after the roof is fixed

So you're going to give the money to the roofer and then the roofer is going to go and they're going to get that work done So they're going to do some work and get rid of that damage, fix the roof on that side, then fix the roof on that side and the roof is completely fixed, everything is done At that point either you or the roofer is going to send the final tally to the insurance company And the insurance company is going to write you a second check They're going to write a check for the rest of the replacement cost of the roof

And then you're going to pass that on to the roofer plus your deductible, generally $1,000 dollars, and the situation will be resolved Now one last little piece about fixing your roof Sometimes those checks from the insurance company include the mortgage company's name on the check and that can be kind of a pain because you've got to work that out Well, they're protecting the interests of the mortgage company and your house They've got a mortgage on the house, they're using that house as collateral

If you don't fix your roof and you've got a beat up roof then their collateral isn't as good So the mortgage companies want to know that they're taken care of and that's why their name sometimes is on a claim check Alright, so your roof is all fixed, everything's taken care of, the claim is over Finally our rookie mistake and this is an obvious one Not paying attention to wind/hail coverage on your policy

Take a look at your policy right now Pause this video, go look at it Figure out what kind of wind/hail coverage you have so you know in a claim situation what will happen And if you don't like the coverage that you have you can fix it now instead of after the damage has happened Alright, that was it

What did we learn today? Why insurance companies have different rules for your roof and that's simply because there's such a high amount of claims that happen on roofs that insurance companies are trying to mitigate their risk We also learned Replacement Cost, the best kind of coverage for your roof ACV coverage for your roof, minus depreciation for age And finally, the worst, no roof coverage at all So check it out and see what kind of coverage you have on your policy

If you want to watch some other Shine videos we've got some great ones for you It starts off with the New Home Buyers Guide We walk you through from thinking you want to buy a house all the way through the process of purchasing and closing on that new home of your dreams We'll give you a step by step on that Great video to check out

Five Steps to a Homeowners Claim, really fairly similar to this one, but really lays out in general how homeowners claims work And then finally if you just want funny, How Not to Light a Bonfire You can laugh at that and go on with your day with a big smile on your face Finally, what's next? As always, the last step in this video is to subscribe to our channel on YouTube If you haven't done so already we try and make great videos just like this one explaining things about insurance or finances that just give you step by step ideas of how they work

Hopefully, make you smarter about the topic So subscribe to our channel and we'll get those out to you every time we publish And finally, if you liked this video, if you think it could help a friend, maybe someone who just had hail damage to their house or someone who lives in the Midwest or in Florida for hurricanes, any of that kind of stuff, pop that out on your social media and share this information with others Alright, that was it Hope you learned a ton from this video and we'll see you next time