Changes in roof coverage may leave you paying to replace your roof
Homeowners in cities such as Atlanta, Macon and Augusta could find their policies now offering “actual cash value,” or ACV coverage on the roof instead of the full “replacement cost value” or RCV which is standard in other markets.
If your roof has been damaged by wind or hail, and you live in the wrong state, you may be on the hook for the cost of the new roof, or at least a large portion of it.
In the past few years a number of states in the south have been hard hit by wind and hail damage storms. Georgia, Kentucky, Tennessee and Oklahoma have all had more than their fair share of wind and hail storms and insurers in these states (and other states) have dialed back the roof coverage in their standard homeowners policy. This is especially true for homes with older roofs.
Homeowners in cities such as Atlanta, Macon and Augusta could find their policies now offering “actual cash value,” or ACV coverage on the roof instead of the full “replacement cost value” or RCV which is standard in other markets.
The difference between these two coverages can cost you a ton of money. If you have an ACV policy your insurer will repair or replace your roof minus your deductible as well as depreciation for the type and age of your roof. If you currently have an older roof the depreciation amount can be significant.
On the other hand, a RCV policy will pay for the entire cost of the new roof, minus your deductible.
The shift to ACV policies started roughly two years ago with major insurers leading the charge. Industry spokespeople claim it is necessary as some homeowners were getting a brand new $15,000 roof every year for three years running while only paying a $1,000 annual premium, making it an unsustainable proposition for the insurance companies.
Could Confuse Consumers
If you have never heard of ACV and RCV and don’t know the difference, you are not alone. While some insurers are offering a choice, with RCV coming in at a higher price, others are simply changing their standard policies. Homeowners unaware of the changes could be in for a big surprise if their roof is damaged by a wind or hail storm.
As an example, if you have a $20,000 roof claim and your roof is 10 years old at the time of the damage you could be facing a $11,000 bill to get a new roof. How do we get to that figure? A $1,000 is the standard deductible and deprecation of $10,000. If you had an RCV policy, your total cost would be capped at your deductible of $1,000.
Some insurers attach a roof payment schedule to their policies so there are no surprises when its time to make a claim. Depreciation is only applied to wind and hail claims, other losses, such as fire would be covered at full replacement value.
Consumers are free to choose a RCV policy but the premiums are often much higher than an ACV policy. Insurers claim it is a way for customers to save money by purchasing less coverage. While this is certainly true, consumers should make sure they have enough cash on hand to cover their share of a new roof if disaster would strike.
Consumer Advocates Claim its Unfair
While insurance industry groups claim that the new ACV model is fair and allows consumers to make a choice regarding their coverage, numerous consumer groups claim the new method is unfair.
Their concern is that middle and lower income consumers and people with older homes are being unfairly penalized. In addition to the added cost to consumers, they feel that the ACV policy simply makes consumers feel cheated. Even some insurance agents have spoke out against the change.
Consumer advocates recommend that consumers who have been switched to an ACV policy should shop around. Insurers rate risk differently and also have different polices for dealing with roof replacement. Shopping a number of insurers will help you find a policy that meets your roof replacement needs at a price you can afford.
If you live in Georgia and recently had your roof replaced you may be able to save on your homeowners insurance. Many insurers will offer a discount for a new roof that ranges in the $300 to $700 range. Please let the licensed agent know when you receive your quote.
For additional home insurance savings in Georgia, please call 770-884-4588 today or you can get multiple home insurance quotes online now!