Insurance valuation methods can be confusing and difficult to determine based on your individual needs and circumstances.

The older the roof, the more deducted for depreciation. =$ 4,000 insurance payment =$14,000 insurance paymentĪs you can see in the above example, Doe will receive $14,000 from his insurance company whereas Smith will receive only $4,000. – $10,000 depreciation ($1000/yr x 10 years) – $0 depreciation (no depreciation with RCV) Policy deductible: $1,000 Policy deductible: $1,000Ĭost of repairs to roof: $15,000 Cost of repairs to roof: $15,000ĭepreciation schedule: $1,000/year Depreciation not applicable for RCV Insurance valuation method: ACV Insurance valuation method: RCV The only difference is that Smith has ACV coverage and Doe has RCV coverage.Ĭost of Smith’s roof ten years ago: $15,000 Cost of Doe’s roof ten years ago: $15,000 In this example, we’ll assume that Smith and Doe are neighbors, living in exactly the same type of house, constructed in the same year, with the same roof, and both have had the same type of wind damage to their roofs. Here’s an example to help explain the difference. There is no deduction for depreciation under the RCV valuation method. This means the replacement cost value minus your deductible. If your policy is for RCV, your insurance company will pay the replacement cost value of your roof at the time of a covered loss. Generally, the older your roof, the higher the amount depreciated…or not covered under your policy. This means the actual cash value minus your deductible amount minus the depreciation cost according to the age of your roof. If your policy is for ACV, your insurance company will pay the actual cash value of your roof at the time of a covered loss.

This difference could amount to thousands of dollars depending on the age of your roof.Īs with any other covered property in your homeowners policy, your roof is subject to either ACV or RCV when you suffer a covered cause of loss. If you live in an area where roof damage from windstorms and hail is prevalent or possible, the decision you make about this coverage could mean the difference between paying out just your homeowners policy deductible or your deductible plus depreciation costs. What might seem as an attractive, lower premium offering at first sometimes catches homeowners off guard and without sufficient financial resources to pay for roof repairs after a loss occurs.

As a result, some insurance companies have begun offering to cover roofs for Actual Cash Value (ACV) rather than Replacement Cost Value (RCV). Wind and hail storms have been increasing in frequency over the past several years.

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