Do you have roof damage that’s got you thinking it might be time to replace your roof? If you’ve spent years paying homeowners insurance premiums, you may want to file a claim to get some help paying for a new roof. But when is it actually a good idea to file a claim? Are there any negative repercussions from filing a claim? The experts at Eagle Watch Roofing deal with insurance claims all the time. In this article we’ll go over some of the considerations you’ll want to make before deciding to file an insurance claim for roof damage. And if you have any further questions, you can always contact us for more help deciding when the right time is to file a claim.
Know Your Insurance
The most important thing you can do before deciding to file a claim is to get to know your policy. You can do this by reading over your policy yourself. But if the fine print is a little hard to understand, don’t hesitate to call your insurance broker. Depending on the size of their office, you will speak to the broker or another representative. They should be happy to explain the details of your coverage. You can ask questions and get the information you need to consider whether to make a claim.
In general, there are two main types of coverage. Two homeowners with the same damage may receive very different payouts depending on the type of coverage they agreed to when the policy was purchased. The first type of coverage is Actual Cash Value (ACV). The second type is Replacement Cost coverage. ACV coverage will typically have lower premiums, but it will also have lower payouts. When it comes to a roof, the difference between an ACV payout and a Replacement Cost payout can be significant, so knowing your policy is an important first step in deciding when to file a claim.
Let’s take a more in-depth look at these two types of coverage.
Actual Cash Value (ACV)
With an ACV policy, you will receive the cash value of the item being replaced, in this case, your roof. At first, a cash payout can seem like a great deal, but it may actually leave you in a tough position. That’s because the insurance company is only paying for the current cash value of your roof. That’s not what you paid for it when it was installed and not what it will cost to get a new one. Instead, to calculate the current cash value of your roof, the insurance adjuster will start with the original value of your roof when it was new and then subtract depreciation. Depreciation is a calculation of how much less your roof is worth in its current state (before the damage you are claiming) than it was when you installed it.
ACV Coverage Example
Let’s look at an example of an ACV claim on your roof. Let’s say that the cost to replace your roof today is $10,000. The insurance adjuster will not pay that amount. Instead, he or she will prorate the current value of your roof according to its age and its remaining lifespan (had it not been damaged). So if your adjuster determines that your 20-year-old roof had a reasonably expected lifespan of 30 years, your roof has lost two-thirds of its value in those 20 years. The theory is that you have enjoyed your roof for 20 years, thus “using up” two-thirds of its value. Why should the insurance company pay you for another 30 years worth of roof when you’ve already gotten 20 years out of the roof they covered?
So after factoring in the depreciation of two-thirds of your roof’s value, the actual cash value of your roof before the damage is just one-third of the cost of a new roof, in this case, $3,333. Now consider that the deductible on your insurance is $1,000. That means that the insurance company will pay a total of $2,333 towards your new $10,000 roof. Is that worth making a claim? Maybe. We’ll talk about that more later.
Replacement Cost Coverage
Replacement cost coverage is basically what it sounds like. It covers the cost of replacing the item that was lost. So if your roof is a total loss and needs to be replaced, the insurance payout will cover the full cost of replacing your roof. There is no calculation of depreciation, just what it will cost to make you whole again. After looking at the limitations of ACV coverage, it should be obvious why this is a superior form of coverage. Unlike ACV coverage, replacement cost coverage will make you whole again. However, as you might expect, it costs more. You will pay higher premiums than an ACV policy.
Let’s look at an example of replacement cost coverage in action. You were enjoying your roof, which you’ve had for 20 years. Suddenly, a storm hits your already aging roof and does some serious damage. After an inspection by an established roofing company, you get the bad news that it’s time to replace your roof. They give you a written estimate for $10,000 to replace the roof. You file a claim, and the insurance company comes out to your home to do his or her own inspection. The adjuster agrees that you need a new roof. So you present the adjuster with your written estimate for $10,000. If the adjuster deems it a reasonable estimate, you receive the full cost of replacement minus your $1,000 deductible, a total payout of $9,000.
Filing a Claim
There are some important steps in the process of filing a claim. First, a written estimate is absolutely essential. You will not get any money without a written, itemized estimate from a reliable roofing company. Second, the adjuster needs to determine that the replacement is really necessary. In the case of a claim for repairs, the adjuster will determine exactly what damage is covered and which repairs the insurance will pay for. This is where it pays to partner with a good roofing company.
Once you make a claim, Eagle Watch Roofing will come to your home to meet the adjuster. We’ll accompany the adjuster during their inspection to make sure that the adjuster is reaching a fair determination of the extent of the damage to your roof.
The adjuster and the insurance company have to agree with the roofer about the cost of replacement. We’re happy to help with that. Then you will receive at least two checks. The first check will be for part of the cost of replacement. It is a downpayment. When the work is completed, we’ll submit an invoice directly to your insurance.
If you have replacement cost coverage, your insurance will pay us for the remaining amount on the invoice, minus your deductible. So if the replacement cost is $10,000, your insurance will pay Eagle Watch Roofing $9,000, and we’ll bill you for the remaining $1,000 deductible. If you have ACV coverage, using the example above, the insurance company will pay us a total of $2,333, and we will bill you for the remaining $7,677. If you need help paying, we offer convenient financing options.
Is it worth making an insurance claim?
The big question most homeowners have is whether it’s worth making a claim. The answer is that it depends. The fear that most homeowners have is that making a claim will raise their premiums or even cause their insurance not to renew their coverage. And that’s not an entirely baseless fear. According to InsuranceQuotes.com, a single claim on your homeowners insurance could raise your insurance premium by an average of 9%. A second claim could boost your premiums by 20%. In Georgia, an insurance company cannot cancel your insurance policy for making a legitimate claim, but they can choose not to renew your policy.
The general rule of thumb is that you shouldn’t use your homeowners insurance for small claims. The threshold for most insurance companies in one claim every ten years. More than that, and your coverage or your premiums may be in jeopardy. Even if you go to another insurer, your claims history will follow you. That’s because all claims are recorded in a national database and your claims history can be checked by any potential insurer before offering a policy. If your insurer drops you for too many claims, you may find it hard to get new insurance. There are options for insurers in the Surplus Lines Market, but the coverage will typically be more expensive and have less coverage than regular insurance policies.
Since you won’t be using your insurance for small claims, it makes sense to opt for the highest deductible you could afford to pay in the case of catastrophic loss. If you plan to pay out of pocket for damage of only a few hundred or a thousand dollars, as you should, it doesn’t make sense to pay extra for a low deductible.
Getting Expert Advice
If you’re not sure of the extent of the damage to your roof, or you have questions about the claims process, the experts at Eagle Watch Roofing are happy to help. We will come to your home and perform a no-cost, no-obligation roof inspection and service quote. Once you know the cost of repairs or replacement, you can make an informed decision about whether to file a claim. If you choose to file a claim, we will work with your insurance every step of the way to make sure you pay as little out of pocket as possible. If you choose not to file a claim, we have convenient financing options to help you pay for repairs and replacement. Contact us today to learn more.