Is depreciation coverage worth it on homeowners insurance?
Short answer. For most Georgia homeowners, yes. In homeowners insurance the coverage that pays back depreciation is replacement cost on the dwelling, and on a roof it can be worth thousands of dollars after a hail or wind loss compared with an actual cash value roof endorsement. Whether a lower premium justifies giving it up depends on your roof's age and how large a bill you could absorb.
What you are choosing between
- Replacement cost on the roof. Depreciation is held back, then paid once the roof is replaced. Your share is about the deductible.
- Actual cash value roof endorsement. Depreciation is subtracted and never paid. On a 15 year old roof that can be half the cost.
- Roof payment schedule. Pays a set percentage by age and material, which falls every year.
Quick math
Take a $14,000 roof replacement on a 15 year old roof given a 30 year life, with a $1,500 deductible. With replacement cost you receive $12,500 in total. With an actual cash value roof you receive $14,000 minus $7,000 depreciation minus $1,500, or $5,500. That $7,000 gap is what the coverage is worth on one claim.
When giving it up can make sense
- You plan to replace the roof soon and will ask for replacement cost terms afterward
- The only replacement cost option on an older roof costs far more in premium
- You could comfortably pay a large share of a roof yourself
Ask your agent for quotes both ways and read the endorsement, since some apply to all perils and some only to wind and hail. Zero depreciation cover is an auto insurance add-on common in some other countries; for a house, replacement cost is the equivalent. See roof age and insurance and roof payment schedules.