Navigating Roof Insurance in Colorado: A Comprehensive Guide by Hennessey Roofing
Roof insurance in Colorado causes almost as much trepidation for our customers as the actual damage to their roof. Hennessey Roofing explains the key things to understand when it comes to insurance and your roof. In this article, readers learn the difference between Actual Cash Value (ACV) and Replacement Cost Value (RCV) and flat-rate deductibles vs percentage deductibles. Our expert roofing team even explains key points about code coverage and compliance and cosmetic waivers. Homeowners who understand their insurance, or work with a roofing contractor who does, save more money on their roofing replacement projects. Keep reading below to learn how your insurance can help with your next roofing project!
Actual Cash Value (ACV) vs Replacement Cost Value (RCV)
ACV vs RCV roofing insurance creates very heated conversations between homeowners and insurance companies. Hennessey Roofing describes the key differences between the two types of replacement coverages below. Many insurance companies decided to switch to ACV recently after Colorado was devastated by hail in recent years. Basically, as insurance claims went up due to major hail and snow recently, several insurance companies were losing profit because their cost for RCV premiums didn’t offset the cost of the roofs they had to replace.
Insurance companies describe Actual Cash Value (ACV) coverage by determining what the value of your roof was at the time of the claim. This means that older roofs and roofs with pre-existing damage or cheap materials will be factored into what the insurance company will pay for your roof replacement. They depreciate the value of your roof over time meaning that, oftentimes, ACV coverage will not pay for the total cost of replacing your older roof. ACV coverage tends to be cheaper than RCV coverage because depreciation is attached to ACV and therefore costs the insurance companies less. Homeowners often choose ACV coverage because of the cheaper premiums but many don’t realize what they’re risking. Something else to consider is that ACV policies are standard on rental properties.
Replacement Cost Value (RCV) provides more comprehensive coverage for roof replacement projects. RCV is essentially the opposite of ACV. RCV coverage means that regardless of the age or condition of your roof, the insurance company will pay to replace it with similar materials after a covered event. Our experts recommend selecting an RCV policy whenever possible despite the properties’ condition. It’s important to note that the roof is not completely free to the homeowner, however. The homeowner must pay their deductible cost and the insurance company will cover the remainder of the costs.
Shift to ACV by Insurance Companies:
- Due to recent hail devastations in Colorado, many insurance companies have switched to ACV policies.
- The spike in insurance claims from major hail and snow incidents led to reduced profits for insurers, as RCV premiums weren’t covering the costs of roof replacements.
Understanding ACV Coverage:
- ACV is calculated based on the roof’s value at the time of the claim.
- Factors like age, pre-existing damage, and material quality are considered, often leading to lower payouts.
- Depreciation is a key component, meaning ACV often doesn’t cover the full cost of replacing an older roof.
- ACV policies are typically cheaper due to this depreciation factor.
- Homeowners may opt for ACV for lower premiums, but they risk inadequate coverage.
- ACV policies are standard for rental properties.
Benefits of RCV Coverage
- RCV offers more comprehensive coverage for roof replacements.
- It covers replacement costs regardless of the roof’s age or condition, using similar materials.
- Hennessey Roofing recommends RCV policies for better protection.
- While the homeowner is responsible for the deductible, RCV covers the remaining replacement costs.
Understanding the nuances between ACV and RCV roofing insurance is essential. These policies significantly impact the financial implications for homeowners in the event of roof damage. Hennessey Roofing suggests careful consideration of these options to ensure that your home is adequately protected, especially in regions like Colorado that are prone to severe weather conditions.
Flat Rate Deductibles vs Percentage Deductibles? What Are Deductibles?
Home insurance uses a lot of words that people don’t see every day. This creates added confusion when purchasing the policy and even further confusion when it’s time to make a claim. The experts at Hennessey Roofing deal with insurance companies daily and strive to help homeowners understand their insurance policy and how it relates to their roof. One of the most common questions we hear is, “What are deductibles?” This answer is simple. Deductibles are what homeowners owe out of pocket. They are taken out of the total amount of the claim paid by your insurance. Deductibles should be paid directly to your roofing contractor as part of the total cost of the roofing project.
As part of a bill signed by the Colorado Senate, it is illegal for roofing contractors to cover the cost of your deductible. This means that contractors making these offers, especially after storms, are putting themselves and you at risk of committing insurance fraud in Colorado. Your premiums or monthly payments do not count towards your deductible, unfortunately, which is a common point of confusion when it’s time to report a claim.
Another common question we get is, “What’s the difference between a Flat Rate Deductible vs a Percentage Deductible?” This question requires a slightly deeper understanding of insurance. Flat rate deductibles show up most often. They are the most simple to understand. Insurance companies usually offer a higher deductible option and a lower deductible option. The higher deductible option is usually cheaper per month in premiums. The lower deductible costs more per month, but less in the event of a claim. Both have their merits depending on the homeowner’s budget.
The lesser-known option confuses many more people and is growing in popularity with insurance companies. The Percentage Deductible combines math with insurance and can sound great when they sell you the policy. Put simply, homeowners can determine their deductible in the event of a claim by taking their deductible percentage and multiplying it by the total value of the home/property for which the home/property is insured. This causes a little more confusion so consider the following example. If your home/property is insured for $350,000 and the deductible is 1% of that coverage, you are agreeing to pay a $3,500 deductible. Hennessey Roofing highly recommends that you choose a flat rate deductible, but if you must do a percentage, don’t agree to pay more than 1%.
What Are Deductibles?
- Deductibles are the out-of-pocket costs homeowners are responsible for before insurance coverage kicks in.
- They are subtracted from the total claim amount paid by the insurance.
- Homeowners should pay deductibles directly to their roofing contractor as part of the roofing project cost.
Legality Concerning Roofing Deductibles in Colorado:
- According to a Colorado Senate bill, roofing contractors cannot legally cover your deductible.
- Offering to cover deductibles can result in insurance fraud charges in Colorado.
- Monthly premiums do not contribute towards your deductible, a common point of confusion.
Flat Rate vs Percentage Deductibles:
Flat Rate Deductibles:
- More common and simpler to understand.
- Options typically include a higher deductible for lower monthly premiums and a lower deductible for higher monthly premiums.
- Suitable for different budgetary needs.
- Increasingly popular with insurers but more complex.
- Calculated by multiplying the deductible percentage by the total insured value of the home/property.
- Example: A 1% deductible on a $350,000 home equals a $3,500 deductible.
- Hennessey Roofing advises choosing a flat rate deductible or limiting the percentage deductible to no more than 1%.
What Is Code Coverage or Code Compliance Insurance?
Code coverage presents an opportunity for homeowners with older roofs. As time passes and new data are available for building departments, they often update building code requirements. This means that your older roofs may not be up to the current building code in your area. If a covered event causes damage to your roof and you have the code coverage insurance option, the insurance company will pay to help you bring your roof up to code and repair the damage to the roof. If a homeowner does not have this code coverage option, the homeowner is responsible for the cost of getting their roof up to code. This would be an additional expense above and beyond your deductible.
Code coverage insurance is an essential aspect for homeowners, especially those with older roofs. It’s designed to align your home with current building codes during repairs or replacements. Here’s a breakdown of what this insurance entails:
Benefits for Homeowners with Older Roofs:
- As building codes evolve, older roofs might not meet current standards.
- Code coverage insurance is particularly beneficial in these cases.
How Code Coverage Works:
- When a covered event (like a storm or natural disaster) damages your roof, this insurance kicks in.
- It covers the cost of updating your roof to meet current building codes as part of the repair process.
- This ensures your roof not only gets repaired but also complies with the latest safety and construction standards.
Financial Implications Without Code Coverage:
- Without this coverage, homeowners bear the full cost of making their roofs code-compliant.
- This expense is in addition to the standard deductible on your policy.
- The lack of code coverage can significantly increase out-of-pocket costs during roof repairs.
Why Consider Code Coverage Insurance:
- Provides peace of mind knowing your roof will meet safety standards after repairs.
- Protects against unexpected financial burdens associated with code compliance.
- A smart investment for homes with roofing that may soon be outdated by new codes.
What Are Cosmetic Waivers For Roofing Insurance?
Cosmetic waivers for roof insurance in Colorado come up often. They create some of the biggest points of contention between insurance companies and homeowners in Colorado. A cosmetic waiver (a.k.a. cosmetic exclusion or cosmetic endorsement) exists within many homeowners’ insurance policies that state that the insurance company will not pay for cosmetic damages to their roof. Homeowners usually take this to mean minor or small repairs. In fact, insurance companies take this to mean anything that is not a structural or functional issue in how the roof performs. This means that ugly hail damage to your roof that doesn’t create leaks or structural damage can often be waived by insurance companies. This is particularly frustrating for homeowners that are looking to sell their home or who live in heavily-regulated HOAs.
Summary of Roofing Insurance in Colorado
Roof insurance in Colorado creates many concerns for homeowners of all ages. The policies are often hard to understand and use vocabulary that many people don’t see on a regular basis. We believe that our job as your professional and stress-free roofing contractor in Colorado Springs is to help you navigate the roofing insurance process to get the most from your insurance companies. Our team regularly communicates with these insurance companies, adjusters, and building engineers to help our customers get the most out of their insurance coverage. Contact us today to learn more about your policy and your options for repairing or replacing your damaged roof.