According to Home Advisor’s 2016 Roofing Cost Guide, the average homeowner in the U.S. must spend $6,789 to install a new roof after hail, wind, or other factors have damaged the old one. To make matters worse, your replacement could actually cost twice that much, depending on your roof’s composition, its pitch, and other factors.
This raises the real-world question: Do you have up to $12,000 on hand—right now—to devote to roof repair or replacement? If you’re like most of us, the answer is an unequivocal “no.” That’s why it’s so crucial to have the right insurance in place for your roof.
Your Two Main Options
As you think about insurance coverage for your roof, you essentially have two main policy options—Actual Cash Value (ACV) Loss Settlement or Replacement-Cost Loss Settlement. The one you choose will determine how much money you’re entitled to once you file your claim. Here’s the difference between the two:
- Actual Cash Value (ACV) Loss Settlement factors in your roof’s condition and age to determine a depreciation amount. That amount is then deducted from the amount of money you receive via insurance to repair or replace your roof.
- Replacement Cost Loss Settlement offers coverage to repair or replace your roof without factoring in depreciation.
According to Claims Management Magazine, covering roofs on an ACV basis has become more common lately. And you can probably guess why—the premiums are lower. But this type of coverage can prove to be “penny wise and pound foolish.” Why? Because, thanks to the roof-depreciation it factors in, an ACV policy can leave you far short of the actual amount of money you’ll need to repair or replace your roof. And that could create a big financial burden for you—out of the blue—especially if your roof is damaged near the end of its life expectancy.
The Right Coverage for Your Roof
As we’ve seen, getting the right insurance coverage for your roof can involve several factors. Many people find that having their roof covered on a replacement-cost basis gives them the protection and peace of mind they desire. But you may feel differently, or simply have questions about roof insurance. Here at A2Z, we want you to know we’re always available to answer your questions and guide you toward the right coverage for your needs.