It’s no secret that the age of your roof can dramatically impact the value of your home. But, something that many homeowners aren’t aware of is the effect that age has on your roof insurance claims. As we go through this blog post, the information we’re using is specific to asphalt roofing shingles. Other roofing materials will be similar, but their rates of deprecation differ.
You deserve to know how roof depreciation affects your insurance claims, so we’re here to tell you all about it. We’ll also cover ACV vs. RCV insurance policies and break down some simple depreciation rates.
WHAT IS ROOF DEPRECIATION?
Roof depreciation is a term used to describe the rate at which your roof depreciates from when you bought it or bought your home until the day you make a claim. Roofs usually depreciate at a rate of 5% each year from the date of purchase or installation. The first five years after installation will see the smallest amount of depreciation.
The two other factors that can also impact the value of your roof are wear and obsolescence. Your roof obviously wears with age, but in some cases, the wear will be more extensive due to improper roof care. Obsolescence specifically refers to different elements of your roof becoming outdated. This can, however, be argued as to how much it truly affects the cost of replacement.
WHY DOES IT MATTER?
Because your roof was worth more when you purchased it than the time it was damaged, your insurance company will use the rate of depreciation to determine how much money they’ll need to pay you for a claim.
However, two different insurance models affect how your insurance company will approach a roofing claim.
ACV VS. RCV
Roof depreciation is calculated at the time you make a claim. All three factors are taken into account. The sooner you make a claim after your roof is installed, the more money you’ll receive for the claim under either insurance model. But here’s how they both work.
ACV (Actual Cash Value)
ACV stands for Actual Cash Value. With this model, your roof insurance company will take the cost of a new roof and subtract it from the value of your roof at the time you make a claim. For example, if your roof has a listed ACV of $20k and you make a roofing claim at 20 years old, it may only have an estimated value of $5k after roof depreciation. In that instance, your insurance company is going to pay you $5,000 to help with repairs, and you’ll have to cover the rest.
RCV (Replacement Cost Value)
This model is a little different in that it considers roofing depreciation when you make a roofing claim. It’s possible that your roof has an RCV of $20k, but after 12 years, it may only be worth $12k. A roofing claim in this scenario could see a recoup of 100% of the cost to replace your roof through the RCV model. The downside to this insurance model is that it’s significantly more expensive for homeowners.
ACCURATELY ASSESSING ROOF AGE FOR INSURANCE
It’s important to remember that roof depreciation is calculated at the time of a roofing claim. If you have an ACV insurance policy, you’ll need to take roof depreciation into account when assessing roof age. You won’t be penalized for the roof being older, but it may have a reduced value because of its age.
The best way to protect yourself and get a fair assessment is to document your roof’s age and condition from year to year. Take several pictures and date them to show your insurance company when you make a claim.
An RCV roof insurance policy, however, will be calculated at the time of a roofing claim regardless of roof age. That’s a benefit that you’ll have to pay for in your home insurance policy, but it is a huge one.
ROOF DEPRECIATION RATES
If you’ve been trying to determine whether you want to pay for ACV or RCV insurance on your roof, then you’re probably wondering how much and what rate your roof will be depreciating. Here’s a simple chart that can help you easily understand what the cash value of your roof would be on average.
COST OF ROOF WHEN INSTALLED CASH VALUE
20k after 1 year 20k
20k after 5 years 15k
20k after 10 years 10k
20k after 15 years 5k
20k after 20 years <5k
GET HELP FROM THE PROFESSIONALS!
If you’re overwhelmed with the insurance process, we’re here to help you. As a roofing company, we’ve dealt with a few insurance claims over the years, and we’ve learned some of the best ways to handle claims.
The benefit of having MARS Restoration help with the insurance claims process is that you’ll be getting help filing a claim and a roofing company that helps get the job done.