This post is sponsored by Flury-Hinderks Insurance.
When considering insurance options for your home, it’s essential to understand what coverage you currently have for your home and how your insurance company will respond in the event of a severe weather claim.
Replacement cost coverage ensures that if your roof is damaged, destroyed, or needs replacement due to a covered loss, your insurance policy will cover the full cost of replacing it, minus any deductible. This coverage is different from actual cash value coverage, which takes depreciation and the age of your roof into account when determining the payout for an insurance claim.
With true replacement cost coverage, you can have peace of mind knowing that you won’t be left with a significant out-of-pocket expense. Without replacement cost coverage, your insurance company may only pay for a portion of the roof replacement depending on the age of the roof itself. If a typical roof replacement is $40,000, that could amount to an out-of-pocket cost of 50% of that or $20,000!
How do I know what coverage I have?
An easy first step is to look on your insurance policy declaration page or renewal paperwork. This should be one of the first pages in the last set of forms sent to you via mail or email. It should state on that form that you have replacement cost coverage for your roof. Other terms may include “roof settlement type – replacement cost” or “replacement cost on roof surfacing”.
What are some examples of alternative coverage other than replacement cost?
There are several terms out there that insurance companies may use to describe something other than true replacement cost. These may include “roof surfacing endorsement”, “roof payment schedule” or “actual cash value”. The alternative to replacement cost may be a claim payment that only covers half (or less) of what you may have been expecting from your insurance company. With new roofs potentially costing $30,000 to $40,000 dollars or higher for an average replacement, that small policy detail could end up costing you $15,000 of unexpected expense.
Why would insurance companies not provide full replacement cost?
To provide economical alternatives, the insurance industry developed different levels of coverage that may be less expensive compared to full replacement cost. Something other than replacement cost may be a valid option for some residences that have older roofs or that may be uninsurable otherwise. Your insurance company or your current agent may have even explained your coverage at one point but some customers may have simply forgotten their coverage is not true replacement cost.
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