When a hurricane or tropical storm rolls through, and suddenly your roof is a mess—shingles scattered, leaks forming, and you’re left wondering, “How am I going to pay for this?”
Filing an insurance claim is your next step, but then you’re hit with terms like “Replacement Cost,” “Actual Cash Value,” and “Roof Payment Schedule.”
It’s enough to make your head spin.
Don’t worry—I’ve been there, and I’m here to break it down for you in plain English.
Let’s walk through these settlement options so you can figure out what’s best for your home, your bank account and your peace of mind
Insurance companies typically offer three primary settlement methods—
Replacement Cost Value (RCV)
Actual Cash Value (ACV)
Roof Payment Schedule
Why does the roof payment option matter?
Each option has distinct implications for how much money you receive, when you receive it, and how it impacts your out-of-pocket expenses.
This article explains these options in detail to help you make an informed decision.
What is Replacement Cost Roof Settlement?
What is it?
Replacement Cost Value (RCV) is a settlement option where the insurance company agrees to pay the full cost to repair or replace your damaged roof, based on current market prices for materials and labor, without factoring in depreciation.
RCV aims to restore your roof to its pre-loss condition, assuming the damage is covered under your policy.
How it works:
• The insurer calculates the cost to replace your roof using today’s prices for materials, labor, and related expenses (e.g., permits, debris removal).
• Payments are typically made in two phases:
1. An initial payment based on depreciated amount.
2. A second payment for the remaining amount of the replacement cost of your roof. This confirms to the insurance company you replaced your roof.
• You may need to provide receipts or proof of completed repairs to receive the full reimbursement.
It prevents customers from getting paid the full replacement cost in one check but the customer decides to repair or patch their roof and keep the money.
When this happens future roof claim damage would be denied because you can’t get paid twice for the same damage
Pros:
• Covers the full cost of replacing your roof, regardless of its age or condition before the damage.
• Minimizes out-of-pocket expenses, assuming the replacement cost doesn’t exceed your policy’s coverage limit.
• Ideal for newer roofs or homes in areas with high material and labor costs.
Cons:
• Requires you to complete the repairs to receive the full payout. If you choose not to repair, you may only receive an ACV payment (one check instead of two).
• Some policies have exclusions or limits (e.g., for older roofs), so read the fine print.
• Premiums for RCV policies are typically higher than ACV policies.
Most insurance companies will automatically change the roof payment option on your home insurance policy from replacement cost to actual cash value once your roof exceeds 10, 12 or 15 years in most cases.
Example:
If your roof replacement costs $20,000 and your policy includes Replacement Cost coverage with a $2,500 deductible, the insurer would pay $17,500 to cover the full replacement cost (minus your deductible).
You would need to pay to the roofing contractor the $2,500 deductible out of pocket.
What is Actual Cash Value Roof Settlement?
What is it?
Actual Cash Value (ACV) is a settlement option where the insurance company pays for the damaged roof based on its current value, factoring in depreciation due to age, wear, and tear.
This means you receive less than the full replacement cost, as the payout reflects the roof’s value at the time of the loss.
How it works:
• The insurer assesses the roof’s replacement cost and then subtracts depreciation based on factors like the roof’s age, material, and condition.
• You receive a single payment reflecting the depreciated value, which you can use to repair, replace, or pocket as you see fit.
• ACV settlements are more common for older roofs or policies with lower premiums.
More insurance companies are going to Actual Cash Value for a roof as old as 10-15 years old.
Pros:
• Lower premiums compared to RCV policies, making it more affordable for some homeowners.
• Provides flexibility—you can use the payout for repairs, partial repairs, or other purposes.
• Faster payout, as it’s typically a one-time payment without requiring proof of repairs.
Cons:
• The payout is often significantly less than the cost to replace the roof, leaving you to cover the difference.
• May not be sufficient to fully restore your roof, especially for older or high-value roofs.
• Can result in higher out-of-pocket costs if you choose to replace the roof.
Example:
Suppose your roof’s replacement cost is $20,000, but it’s 10 years old with a 20-year shingle.
The insurer might apply 50% depreciation, valuing the roof at $10,000.
After a $2500 deductible, you’d receive $7500.
If you want a full replacement, you’d need to cover the remaining $12,500 yourself.
What is a Roof Payment Schedule?
What is it?
A Roof payment schedule is a itemized table that will outline the percentage the insurance company will pay based on the year of your roof.
Here is an example of a Roof Payment Schedule
Example:
For a $20,000 shingle roof replacement on a 15 year old roof if you use the table above the payment would be 40% of the cost to replace.
The insurance company would pay ($20,000 x 40% = $8,000 minus the deductible)
One positive is you know exactly what the insurance company will pay after a roof damage claim.
What you should do now
Review your homeowners insurance policy to determine the type roof payment option you have.
Understand how much the insurance company is going to pay so you are not left in a difficult financial situation after a hurricane or tropical storm.
Check your Wind Deductible as well
A high wind deductible can reduce your claim payment
If your wind deductible is too high you can purchase a wind deductible buy back policy to get your wind deductible as low as 1%.
Rates are as low as $255 annually
