Your roof covers your house, but do you know how your roof is covered? Understanding your roof insurance coverage – Actual Cash Value (ACV) or Replacement Cost is critical. The difference impacts the amount of funds you receive after a covered loss. Let’s break down these common insurance terms so you know your coverage!
Actual Cash Value (ACV)
ACV will provide a payout after a covered loss, but at a depreciated value based on your roof’s age and condition. We’ve talked before about how an aging roof impacts your home insurance. One way insurance carriers provide roof coverage to an aging roof is by setting it on ACV. Clients also may select ACV so they can have a lower premium. The bottom line: with ACV coverage, you may end up covering a large portion of the roof replacement cost yourself, especially if your roof is old.
Replacement Cost
Replacement Cost coverage pays the full cost of replacing your damaged roof. It is typically a higher overall home insurance premium compared to ACV. In today’s hard market, carriers usually have an age cap on when they will provide replacement cost coverage for a roof. For instance, a carrier could cap replacement cost coverage at a roof that is 10 years old or newer. This is why your Cincinnatus Insurance advisor is your greatest resource: we understand the fine details of roof insurance coverage for each carrier and can help you select the carrier that’s best for your roof.
ACV vs. Replacement Cost: a Case Study
Imagine a hailstorm damages the 11 year old roof of your home.
- ACV:
- The cost to replace the roof: $15,000
- Roof value after depreciation of 11 years: $9,500
- Deductible: $2,500
- ACV Payout: $7,000
- Replacement Cost:
- The cost to replace the roof: $15,000
- Roof depreciation: none
- Deductible: $2,500
- Replacement Cost Payout: $12,500
Don’t Let Your Coverage Go Over Your Head
It’s important to understand the differences between ACV and Replacement Cost roof coverage, and stay informed about your home insurance policy. By doing this, you can ensure you’re prepared in the event of a loss. Working together with a Cincinnatus Insurance advisor sets you up perfectly: we can help you choose the perfect coverage for your roof no matter how the insurance industry is behaving!