Your home can lose value as it ages and as it experiences wear and tear. The financial term for this loss of value is depreciation. If your home’s roof is damaged by a storm, you need to understand the part depreciation plays in the claim process.
How Is Depreciation on a Roof Calculated
Calculating depreciation based on age is straightforward. Let’s say your roof is supposed to last 20 years and it’s 5 years old when damaged. The roof depreciates in value 5% for every year, or 25% in this case.
When a claims adjuster looks at a roof, he will consider the condition of the roof as well as its age. If the roof is in decent condition for its age, there may be little to no adjustment for the condition. However, if the roof is in poor condition, had inadequate repairs made, or had other claims made against it, the adjuster may add more to the depreciation calculation.
Recoverable vs. Non-recoverable Depreciation
When you make a claim for roof damage, the insurance company will write you a check for the actual cash value (ACV) of your roof, less your deductible. The ACV is the amount it would take to replace your roof, minus the depreciation calculated.
Let’s say it will take $20,000 to replace your roof and it was 5 years old and in good condition. Your deductible is $1,000. The depreciation was 25%, or $5,000. The ACV would be $15,000. The insurance company would take out the deductible and cut you a check for $14,000.
Recoverable vs. non-recoverable depreciation comes down to what kind of policy you have. If you have replacement cost recovery, you can recover $5,000 in depreciation after repairs are made. If your policy does not include replacement cost coverage, you cannot recover the $5,000 as it’s a non-recoverable depreciation.
- To recover the depreciation, you need to do a few things:
- Repair or replace the roof
- Save all documentation including contracts and receipts
- Specify what work was done on each receipt
- Provide these receipts to your claim adjuster
- Request reimbursement
The insurance company may then issue you a second check for the extra amount it cost to replace your roof. If it took $18,000 to replace your roof instead of $20,000 you would receive a check for the remaining balance of $3,000 (not the full $5,000 depreciation calculated).
If you ever sustain roof damage, call Echols Home Improvements immediately. We are here to help you put your roof back into working order after storm damage.