You probably don’t think about your roof often — and that’s not a bad thing. If you are thinking about it, chances are something’s gone wrong. When roofs wear out or sustain damage, the right insurance coverage can soften the resulting financial blow. Most homeowners’ insurance policies cover your roof to some degree, whether it’s the actual cash value, replacement cost value or guaranteed replacement cost. Understanding the difference between these will help you know what to expect when your roof needs to be replaced.


What is roof insurance?

Homeowners insurance policies generally provide coverage for your roof, but there are several different ways your roof might be covered. There are also situations where your roof may not be covered at all. If your roof is in poor condition, for example, or if it is over a certain number of years old, your insurance company may exclude coverage for roof damage. Talking with your agent is one of the best ways to determine how your insurance policy would respond to roof damage.


What is roof ACV?

Actual cash value (ACV) roof coverage means that your insurance company agrees to pay you for the value of your roof in its current state. Essentially, depreciation is factored into your claim settlement. Depreciation is calculated by a claims adjuster, who will inspect the roof to determine its replacement cost, review its current condition and estimate its remaining lifespan.

For example, a comparable brand-new roof might cost $20,000 and have a lifespan of 20 years. This would mean that it loses 5 percent of its value each year. If your roof is 10 years old, it has lost 50 percent of its value, meaning the actual cash value of your roof is now $10,000. Additional depreciation may be taken out based on the condition of your roof. Some 10-year-old roofs may still be in great condition, while others could be impacted by unrepaired wind or hail damage.

There is a connection between the age of your roof and your insurance coverage. ACV coverage is typically used for older roofs or roofs that are in poor condition. It is typically a less expensive way to cover your roof. Some insurance policies may give you the option to choose between ACV or replacement cost value (RCV), but if your roof is past a certain age (generally 15-20 years, but each insurance company will have its own guidelines), your insurer may automatically stipulate that you have ACV coverage. Some states do not allow insurers to use ACV to assess roof replacement coverage.


What is the difference between ACV and replacement cost for roofs?

Replacement cost coverage is a bit simpler to understand than actual cash value. If you have a homeowners policy that covers your roof on a replacement cost basis, the insurance company is agreeing to pay you what it would cost to replace your roof with a comparable new roof. Your claims adjuster will base their assessment on new roofing materials that are comparable to what you currently have and offer you a settlement for what it would cost to replace your roof with these materials.

Replacement cost coverage generally costs more than actual cash value coverage, but it typically means that your deductible could be your only out-of-pocket expense if your roof is damaged. If your roof is newer or in good condition, you may be able to insure it with replacement cost. Some companies will automatically assign replacement cost coverage to your roof based on its age, or you may be able to choose between actual cash value and replacement cost.


Actual cash value vs. replacement cost coverage for your roof

There are several factors to consider when deciding how to insure your roof. First, what options is your insurance company giving you? Based on the age of your home and your roof’s condition, your insurer may automatically assign a certain coverage type to your roof, taking the decision out of your hands. For example, an insurance company is not likely to cover a 40-year-old roof on a replacement cost basis, since the roof is probably in poor condition.


How is roof damage covered if it is caused by a hurricane?

In hurricane-prone states on the Atlantic and Gulf coasts, windstorm coverage is typically included as part of your standard homeowners policy but may have a separate deductible which ranges from 1 percent to 5 percent of your property’s insured value. Thus, a roofing loss sustained during a named tropical cyclone could be subject to this deductible.


Can you switch from actual cash value to full replacement cost?

You may have the option to choose replacement cost coverage or actual cash value coverage, but it depends on the insurance company, as well as your roof’s age and condition. If your roof is past 15 to 20 years old or in poor condition, your insurer may automatically cover it on an actual cash value basis, and you may not have the option to choose replacement cost. Similarly, some homeowners’ insurance policies automatically cover newer roofs for replacement cost.


Author: Cate Deventer

Originally Published,