How does a roof replacement work with actual cash value insurance?
Short answer. With an actual cash value roof policy, the insurer pays the replacement cost minus depreciation and your deductible, and that depreciation is not paid back even after the roof is replaced. You cover the gap, so check the depreciation figures carefully and plan how to fund the difference before signing a contract.
The math on an older roof
- Replacement cost of the roof: $13,000
- Roof age 15 years on an assumed 25 year life, about 60 percent depreciation: $7,800
- Actual cash value: $5,200
- Minus a $1,000 deductible: payment of $4,200
- Your share of a $13,000 roof: $8,800
Insurers use their own depreciation methods, so treat these figures as illustrative. Payment schedule endorsements work similarly but use a percentage table by age and material; see roof payment schedules.
Where to look for fairness
- Roof age. Make sure the insurer used the actual install year, not the house's build year. Permits and invoices prove it.
- Life expectancy. If the insurer assumed a shorter life than your product is designed for, depreciation runs too high. Ask what life expectancy was used.
- Condition. A well maintained roof may justify less depreciation than a worn one of the same age.
- Complete scope. Missing items like drip edge, starter, steep charges, or overhead and profit shrink the starting number, and every dollar missing from replacement cost also shrinks the ACV.
Managing the gap
- Ask whether code required items are covered separately under ordinance or law coverage, which some policies pay once the work is done
- Choose the same grade of shingle rather than upgrading, unless you want to pay for the upgrade
- Consider financing for the difference
- Never accept a contractor's offer to absorb the deductible or inflate the claim; both are illegal
After replacement, ask your agent whether the new roof lets you drop the ACV roof terms going forward. For the broader comparison, see ACV versus RCV.