Replacing a roof is one of the most expensive home projects any homeowner will ever face. In fact, Angieslist.com reports that it cost consumers an average of $11,095 to tear off and replace an old roof in 2014.
While it’s possible to save over a period of months or years to replace an old roof, sudden damage from something like a windstorm doesn’t give you that option. That’s why it’s so important to have the right coverage for your roof.
In the world of insurance, there are two main loss settlement options that affect the amount of coverage available to repair damage to your roof:
- Actual cash value (ACV) loss settlement factors in the roof’s age and condition to come up with a depreciation amount which will be deducted from the cost to repair the damage to the roof.
- Replacement cost loss settlement reflects the coverage available to repair the damage to the roof without factoring in depreciation.
Replacement cost is the better option when it comes to repairing the damaged portion of your roof because there is no deduction for depreciation. Yet covering roofs on an ACV basis is becoming more common, according to Claims Management Magazine.
Having a roof covered on an ACV basis could become a big financial burden for a homeowner. This is especially true if your roof is older and in poor condition. In some instances, there can be a large deduction for depreciation if the roof is damaged near the end of its life expectancy.
Replacement cost leaves you in a better position to repair the roof damage without suffering the consequences of depreciation being factored in as part of the loss settlement. The tradeoff is that the premium will cost more than it would if your house was insured on an ACV basis. One way to make a replacement cost policy more affordable is to increase your deductible.
How to get the right coverage for your roof
When looking for homeowners insurance, it’s important to talk with your insurance agent about how your roof is covered. Many people find that having their roof covered on a replacement cost basis gives them the protection and peace of mind they need.