You open your first insurance check for roof damage and it is thousands of dollars less than the estimate. Most homeowners assume something went wrong. Usually, it did not. The difference is almost always depreciation, and on many policies a large part of it is paid later.
Replacement cost vs actual cash value
Two numbers drive most roof claims:
- Replacement Cost Value (RCV): what it costs to replace the damaged roof with new materials today.
- Actual Cash Value (ACV): the replacement cost minus depreciation, meaning what the old roof was worth given its age and wear.
For example, if your roof costs $18,000 to replace and the insurance company applies $5,000 of depreciation, the ACV is $13,000.
Why the first check is smaller
On a typical replacement cost policy, the first payment is the ACV minus your deductible. Using the example above with a $2,000 deductible, the first check would be $11,000. The $5,000 of depreciation is held back until the work is done.
Recoverable vs non recoverable depreciation
Recoverable depreciation can be paid to you later, after the roof is replaced and the completed work is documented. Non recoverable depreciation will not be paid back. Some policies, especially on older roofs, pay roofs only at actual cash value or on a schedule based on the roof’s age. Your declarations page and estimate show which applies to you.
How you usually get it back
- The work is completed.
- Your contractor provides a final invoice showing what was done.
- The invoice is sent to your insurance company.
- The insurance company releases the recoverable depreciation.
Many policies set a time limit for completing the work and requesting depreciation, so do not let your claim sit. If you have a mortgage, the check may be made out to you and your lender, so call your lender early to ask how they handle it.
Where the deductible fits
Your deductible is subtracted from what the insurance company pays, which means it is your share of the project. You pay it to the contractor who does the work. In Texas, a contractor cannot legally waive or absorb it. See exactly how the numbers fit together in our deductible guide.
Try your own numbers
Our insurance claim guide has a calculator that shows how the money usually flows on a replacement cost policy. If you want help reading your estimate line by line, give us a call. We will walk through it with you.
This article is general information, not legal or insurance advice. Your policy and your insurance company decide what is paid and when.