How do you calculate ACV for a roof?
Short answer. Actual cash value is the replacement cost minus depreciation, and depreciation is usually the replacement cost times the roof's age divided by its expected life; your deductible then comes off the payment. For example, a $15,000 replacement on a roof 10 years into a 25-year expected life is depreciated 40 percent, so the ACV is $9,000 before the deductible.
The inputs
- RCV: the full cost to replace the damaged roof today, from the insurer's estimate.
- Roof age: years since installation. Permits, invoices or warranty registrations prove it.
- Expected life: the life expectancy the insurer assigns to your roofing material. Carriers set their own figures, so ask which one was used.
- Condition and caps: some adjusters adjust for condition, and many cap total depreciation at a maximum percentage.
- Deductible: a flat amount or a percentage, subtracted from the payment.
Step by step
- Depreciation rate = roof age divided by expected life.
- Depreciation = RCV times that rate.
- ACV = RCV minus depreciation.
- First payment = ACV minus deductible.
Worked example
Using round, hypothetical numbers: RCV of $15,000, a 10-year-old roof, and a 25-year expected life. Depreciation is 10 divided by 25, or 40 percent, which is $6,000. ACV is $9,000. With a $2,500 deductible, the first check is $6,500.
- On a replacement cost policy, the $6,000 is usually recoverable depreciation paid after the work is done, so the total paid is $12,500, the $15,000 minus the deductible.
- On an ACV roof endorsement, the $6,000 is not recoverable, so $6,500 is the total.
Why your numbers may differ
Some estimates depreciate labor and others do not, depending on the carrier and state rules, and some line items are not depreciated at all. Some insurers use a payment schedule instead of age divided by life. Read ACV vs RCV and recoverable depreciation, and ask your adjuster for the age and life used in your estimate.