Replacement Value Coverage Roof

[InsuranceAgent411]

Texas Insurance Agent Here.....For those real estate / mortgage brokers is a homeowner policy that provides reduced coverage on the roof acceptable if you have a mortgage on the property? When your closing loans is this an issue that ever comes up for you? If you work with renewal policies is this an issue that you see or deal with? I have had some kick back from a mortgage company rejecting a policy due to depreciated roofing coverage for a HO3 policy. Feedback is appreciated!

 

[marindependent]

rejecting a policy due to depreciated roofing coverage for a HO3 policy

Not a Texas guy. But I have heard of this, but I rarely see mortgage companies get into those details. Although many of them claim to require RCV on the Roof, Few fail to look for this and require it on documentation.

I am starting to see more ACV roof offers here in Cali. I suspect this will become more of an issue for all of us P&C folks in the coming years.

 

[adjusterjack]

I suspect this will become more of an issue for all of us P&C folks in the coming years.

You're right. The first domino has fallen. ACV on roofs over a certain age is the coming thing.

I had hundreds of claims where people let their roofs deteriorate for 15 or 20 years until a convenient windstorm or hail tore enough shingles off to warrant a new roof under their Replacement Cost coverage when it should have been replaced at their own cost as a maintenance issue years earlier.

 

[HiliCoeran]

You're right. The first domino has fallen. ACV on roofs over a certain age is the coming thing.

I had hundreds of claims where people let their roofs deteriorate for
15 or 20 years until a convenient windstorm or hail tore enough
shingles off to warrant a new roof under their Replacement
Cost coverage when it should have been replaced at their own
cost as a maintenance issue years earlier.

Roofing Mclean Va

Shifting to Actual Cash Value (ACV) for aging roofs is a wake-up call from insurers: Insurance is for the unexpected, not inevitable wear and tear. It's pushing homeowners to not let their roofs go until a storm forces a replacement but to maintain them regularly instead. This move aims to reduce costs and keep insurance true to its purpose. It'll be interesting to see how this change influences homeowner behavior and the overall approach to home maintenance. How do you think this will impact things?

 

[adjusterjack]

I predict a blood bath. There are hundreds of policy forms out there. There will be lawsuits between insured and companies and between insured and agents. Eventually, the industry will have to adopt a standard ACV policy that screams ACV at the top of the front page like this Foremost Classic ACV Homeowners Policy.

https://doi.nv.gov/uploadedFiles/doinvgov/_public-documents/Consumers/Home/Zurich/35000_0999.pdf

The problem is that the internet is rife with allusions to RC policies and ACV policies. I read a smattering of the articles. None of them are saying exactly how the industry is accomplishing ACV coverage on roofs.

All Homeowners policies provide RC coverage on dwellings and other structures subject to the 80% insurance to value. Less than 80% gets ACV only. More than 80% and the insurer has no choice but to pay RC on the roofs.

Seems simple enough. Take out your own HO policy and read the Loss Settlement provision. Simple, eh? Sure. Read Einstein's Theory of Relativity. You won't understand that either. LOL

Option 1 - Deny damage to an old roof via the wear and tear exclusion. But wind is covered and the shingles would just have lain there were it not for the wind. Result - instant lawsuit against the insurer for breach of contract. Punitive damages for bad faith if the insurer does this regularly. With roofs going for $15k to $20k lawyers will flock to the opportunity.

Option 2 - Attach an ACV endorsement to the policy modifying the coverage to explain how and when ACV will be invoked. It'll be buried with the other "amendatory" endorsements. The insured won't read it. Even if the agent explains it, the insured won't remember. When the worn out roof gets blown off in the wind, here comes another lawsuit. This time against the insurer and the agent because "You're my agent, you never told me about this." Ah, I bet you're thinking "Have the insured sign the endorsement just like Named Driver Exclusions and UM/UIM waivers." We know how well those work. Again, "You're my agent, you put a bunch of papers in front of me, you didn't tell me what I was signing."

Option 3 - Write a DP-1 (Dwelling Fire Basic Policy) - Pure ACV on everything - structures and contents. Attach the Personal Liability coverage endorsement. Guess what. The insured is still not going to know what he's buying because the ACV Loss Settlement is at the tail end of the policy. If the insured reads the policy at all, he's in a coma by the time he gets to it. One more time "Agent, you didn't tell me what this was."

Option 4 - Now that I have found the Foremost Classic ACV Homeowners Policy, I think there is hope for the insurance industry. The title of the policy is displayed prominently at the top of the front page. Hard to miss. After the Table of Contents, the title of the policy is again displayed prominently at the top of Page 1. The definition of Actual Cash Value is at the top of the right hand column. Also hard to miss. The insured no longer has any excuse for not understanding ACV though I am sure that there will still be some that don't or won't understand it.

The other problem is who determines the age of the wind damaged roof when only ACV is available?

The insurer, who says the roof is 20 years for maximum depreciation?

The homeowner who says the roof is 7 years old but only bought the house 3 years ago and relied on what the seller told him without any documentation?

The roofer who wants to sell a new roof and says 5 years old, knowing full well that he will have trouble collecting his bill if the insurance company applies a greater amount of depreciation and the homeowner doesn't have the rest of the money on completion?

There's going to be a dispute as to the age of the roof more often than not. Most homeowners would have no idea unless they had replaced it themselves and had sense enough to keep the invoice from the roofer. Maybe there was a building permit. It's usually required for a reroof but it's rarely obtained. I've had roofs replaced on several homes and never got the permit. Rely on the seller? That's not going to work either, for reasons that should be obvious. Bottom line, there is often a battle about the age of the roof.

I predict lots of litigation before this ACV business stabilizes.

 

[fed up]

If your home insurance only covers your roof for actual cash value and it's aged is it even worth filing a claim? I have a 15 year old architectural shingle roof. This morning I noticed what appears to be hail damage on a small section. Last year the insurance company moved my roof to actual cash value from replacement value and upon looking at most insurance companies in my area it seems that's what they do upon your roof hitting a certain age. With that said is it even worth filing a claim with them to get a few thousand dollars for a reroofing job that will be 5 figures? I imagine at best they'd pay 1/3 after depreciation and subtracting a $1500 deductible. There's also the matter that they may drop me if I don't have the work completed in 30 days of the claim being approved and then I will also have a claim on my record.

How's your bank account? Filing a claim does a number of things.
1) lose any claim free discount
2) near guaranteed increase in premium for next couple of years that almost matches the amount of the claim payout over time
3) possibility of non-renewal
4) difficulty in switching carriers due to a claim history

If the "damage has not caused a leak, why fix it? If the roof is doing it's job are you considering repairs just because it doesn't look perfect?

 

[adjusterjack]

If your home insurance only covers your roof for actual cash value and it's aged is it even worth filing a claim? I have a 15 year old architectural shingle roof. This morning I noticed what appears to be hail damage on a small section. Last year the insurance company moved my roof to actual cash value from replacement value

Get an estimate for replacing the roof. Then apply a half to two thirds depreciation, and reduce by your deductible. Then decide.

You might also consider just replacing damaged shingles. There is enough color variations in architectural shingles that a repair will hardly be noticeable.

Then start saving up money for the eventual replacement of a worn out roof.

 

[Elliot Becker]

Texas Insurance Agent Here.....For those real estate / mortgage brokers is a homeowner policy that provides reduced coverage on the roof acceptable if you have a mortgage on the property? When your closing loans is this an issue that ever comes up for you? If you work with renewal policies is this an issue that you see or deal with? I have had some kick back from a mortgage company rejecting a policy due to depreciated roofing coverage for a HO3 policy. Feedback is appreciated!

Hi Insurance agent411,

Special Agent Elliot Becker here, a fellow agent. It wouldn't surprise me if those blood sucking mortgage companies had a problem with depreciated roof coverage, but honestly, I can't blame them on this one. I would never take depreciated value on my roof.

Is selling replacement cost roof coverage not an option in Texas?

Warm regards,

-Elliof

 

[marindependent]

I would never take depreciated value on my roof.

I think its the wave of the future - especially in hail states. I wish you the best of luck with this.

 

[Elliot Becker]

I think its the wave of the future - especially in hail states. I wish you the best of luck with this.

Hi marindependent (Is it Mar Independent, or Marin Dependent?),

I don't think it's the way of the future. The industry goes in ebs and flows. Eventually things will settle back down again. I think we'll be alright.

Positive Regards,

-Special Agent Elliot Becker