Roof Loss Settlement – understand your coverage!

Insurance companies have been consistently increasing homeowner’s rates in the state of Wisconsin over the last year – and will continue to do so for the immediate future.  If you haven’t seen a rate increase in your home policy recently, chances are that you’ll realize one in the coming months.

One of the main reasons that insurers are increasing their homeowner’s insurances rates is due to the weather-related losses that they’ve suffered in recent years. Wisconsin has experienced heavy storm activity including wind, hail, rain, and other harsh elements.  These elements have combined to cause an excruciating amount of claims activity for insurance companies.  Luckily, the large majority of companies have responded positively and recognized the fact that this is the reason they are in business – to restore individuals and families to their condition prior to the loss.

In addition to rate increases, these losses have also affected how insurance companies are settling losses on roofs – particularly wind and hail claims.  A homeowner’s policy has two specific items that you need to be aware of:

  1. A separate wind or hail deductible
  2. An actual cash value loss settlement option on your roof

    How will your homeowners insurance policy cover damage to your roof?

These stipulations and amendments have become very common and are largely determined by:  the age of the roof, the material of the roof, the condition of the roof, the deductible on the policy, and a policy owner’s loss history.   For example, if you have a low deductible on your policy, the insurance company may mandate that you carry a higher deductible for any losses due to wind or hail since they have been both frequent and severe in our area.  Alternatively, if you have an older roof (15-20 years of age or older) or a roof that is in poor condition, the company may have the ability to mandate that the roof be settled on an actual cash value basis until the roof is either repaired or replaced.  Many insured’s choose this coverage because it may lower their premiums, but it is imperative that they understand how it affects them at the time of loss.  If you have a total loss on your roof and have the actual cash value endorsement on your policy, the insurance company will not replace your entire roof with a new one.  They will pay you the actual cash value instead, which is determined by:  taking the cost to replace your roof and deducting depreciation from that cost.  Depreciation is most commonly calculated by establishing a useful life of the roof and determining what percentage of that life remains.   Subsequently, the coverage may be cheaper but coverage is also less!

It is important to understand the difference between replacement cost and actual cash value loss settlements and how they affect the settlement at the time of loss.  Feel free to contact us for further explanation or for other measures you can take to either have a lower wind/hail deductible or get replacement cost loss settlement on your roof!  As always, read your policy forms for exact coverage.


4 thoughts to “Roof Loss Settlement – understand your coverage!”

  1. Nice article. Timely in our area so excellent choice. Easy to read. Good job!

    As for me, I prefer to let my agent read the policy for me. He is the expert. I want to depend on him for his advice and counsel.

    Thanks for the column.

    1. Richard,

      Thanks for the feedback! We’re glad you enjoyed the article. As independent insurance agents, we have a duty to our clients to advise them what is the most appropriate coverage; however, the choice is ulimately up to the policyholder so it is important that policyholders read and understand their policies! If you have any questions, don’t hesitate to contact us – we’d be happy to help!

    1. Hi Rick,

      It very well may be a total loss, depending on the amount of damage. It’s important to check with your agent to see if they’ll replace it with a new roof or pay you what the roof was worth!

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