Replacement cost versus actual cash value on a 22-year-old roof

Hail is the most common large property loss in the Great Lakes region and the one where valuation basis does the most damage to a settlement. The coverage was in force, the claim was accepted, and the cheque still did not cover the roof. That outcome is almost always actual cash value.

The arithmetic

A three-tab asphalt roof has a nominal useful life of about twenty-five years. At twenty-two years old it has consumed most of that life, and actual cash value subtracts the consumed portion before paying.

On the actual cash value line the deductible exceeds the settlement, so the claim pays nothing at all and the homeowner buys the roof. On replacement cost the same claim issues $11,800. Same storm, same policy limit, same premium band. The only variable was one line on the declarations page.

How replacement cost is normally paid

Most carriers, including this one, pay replacement cost in two parts. We issue the actual cash value first, then release the withheld depreciation once the work is done and invoiced. That structure exists to stop the coverage funding an upgrade on a roof nobody intends to replace, and it means you should not sign a contractor agreement that assumes a single cheque.

What to check before the next storm

• Find the valuation basis for the dwelling and for personal property. They can differ.
• Find the wind and hail deductible and convert the percentage into dollars.
• Check whether a roof surfacing schedule endorsement is attached.
• Photograph the roof and the interior while nothing is wrong. Undamaged baseline photographs settle more disputes than any argument.