Understanding roof insurance claim depreciation can be difficult.

There’s a lot that can change your insurance claim’s value. That’s why we’re going to be intentional with this guide and share with you just how the process works. After all, you deserve to know why your insurance company isn’t paying for your total roof replacement or repair cost.

This homeowners guide aims to bring clarity around why your roof costs what it does to replace even when you have good insurance.

man standing outside of house with clipboard going through roof insurance claim depreciation

What is Roof Insurance Claim Depreciation?

Claim depreciation is the process that insurance companies use to determine how much your insurance claim is worth. As your roof gets older, it’s not as valuable for your insurance company to pay as much to replace it. Claim depreciation is a way for your insurance company to determine the value of your roof over time.

For example, a 5-year-old roof is more valuable than a roof that is 10 years old. In turn, your insurance provider will pay out more money on a claim for your younger roof than they will for your claim on an older roof. But, there is one way that you can ensure your roof gets paid for by your insurance company no matter the age.

Two Types of Roofing Insurance

family standing in kitchen with man on phone calling insurance provide about storm damage; storm damage insurance claim

There are two distinct types of roofing insurance that every homeowner needs to have a good understanding of. Note that roof insurance is included in your homeowner policy, but you should still be able to choose how you’d like to insure your roof through that plan. There are some additional ways that your roof can be insured, but these are the most common options used by insurance companies.

1. Actual Cash Value

Actual cash value is when you get the value that your roof is worth. When you claim your roof on your insurance, you’ll receive your roof’s cash value at the time of the claim. Depending on how old your roof is, your insurance company will have a process for determining how much your roof is worth. Here are all of the factors that play into the cash value of your roof.

The equation that your insurance company would use will look something like this: Replacement cost = $25,000, minus the depreciation of your roof $15,000 = $10,000 payment for your insurance claim. If your roof is 10 years old in this situation, then it has depreciated by $1,500 every year.

2. Replacement Cost

With replacement cost insurance, your insurance provider should pay you the total amount that it would cost to fix your roof, less your deductible. So, in this case, no matter how old your roof is, you’ll be able to get it paid for as long as you pay for the deductible. Your insurance company is going to cover all the other costs for repairing or replacing your roof.

Insurance Limitations

fallen tree on roof after storm damage; storm damage insurance claim; roof insurance claim depreciation

It’s important that you know there are limitations to the amounts that your insurance company will payout for a claim. Every insurance company sets limits so as to protect itself from paying out insurmountable amounts. Additionally, your insurance company may limit some coverage for certain damage such as:

  • Limited coverage for water damage or other high-risk situations where your roof would run a greater risk of being damaged.
  • Some policies may include exclusions for certain kinds of damage such as windstorms, hurricanes, tornadoes, or hail. It’s essential that you know what your insurance policy does cover. Too often, homeowners think they have coverage, but when the storm comes, they actually don’t.

Other Limitations Based on Condition

From time to time, your insurance company may choose to perform a home inspection and check your roof and siding condition. If insurance companies neglect to inspect the assets that they insure, they’re putting themselves in high-risk situations. When they do this inspection or ask the age of your roof, they may choose to only insure your home on a cash value basis in order to save money. If your roof is brand new when you start with an insurance company, you’ll be more likely to get replacement cost coverage. At least for the first 5 years or so.

If you need help understanding your insurance policy or making a claim to your insurance company. We’d be happy to help! Reach out to Red Canyon Roofing today to get a free estimate on your roof or a roof inspection.