Homeowners insurance is a policy that usually provides coverage for your home’s structure (house) and your belongings in the event of a destructive event such as a fire. Specifically, your roof is part of your home’s structure and is covered by your homeowner’s insurance. Therefore, what kind of insurance coverage should you have for your roof? Is Actual Cash Value better than Replacement Cost?
Insurance companies typically have two different loss settlement options for your roof: Actual Cash Value (ACV) or Replacement Cost.
ACV means: You will receive only the amount needed to replace the roof minus depreciation (the decrease in value due to age, obsolescence, wear and tear and other factors). To break it down further, you will only get paid for the value of your roof in its current state.
Replacement Cost means: Your insurance company agrees to pay you what it would cost to replace your roof with a comparable roof; one of similar kind and quality without deducting for depreciation. Newer roofs or roofs in good condition most often will have the option to elect this coverage.
** Important note: The age of your roof is important when it comes to your homeowner’s insurance. ACV coverage is usually for homes with older roofs or roofs that are in poor conditions. Depending on the age of your roof, you may have both options to choose from, ACV or replacement cost. Keep in mind, if the roof is past a certain age, some insurance companies will only allow ACV coverage.
Contact Paroubek Insurance today and learn more about what additional coverages you need to keep your home safe and protected for you and your loved ones.
Sources:
https://www.bankrate.com/insurance/homeowners-insurance/roof-insurance-acv-versus-replacement-cost/ https://www.iii.org/article/how-settlement-amount-determined https://www.erieinsurance.com/blog/roof-covered-on-acv