The insurance industry and the roofing industry don’t have the best reputation. There’s always the risk of being taken advantage of by either one.
But when you put the two of them together, it multiplies the chance for scams and misinformation. Some are more common than others, but the worst revolves around deductibles.
In fact, one of the most common questions homeowners have before filing an insurance claim for roof damage is, “Do I have to pay my deductible?” The way some companies answer this question leads to big problems.
For over 30 years, the team at Bill Ragan Roofing has provided transparent information to homeowners, especially about insurance. That’s why I want to help you understand what you pay when getting a roof replacement from the insurance company.
This article answers the following questions:
- Do you have to pay your deductible for a roof replacement?
- What else do you pay for when getting an insurance roof replacement?
- Why is your insurance estimate lower than your roofing contractor’s estimate?
Do you have to pay your deductible for a roof replacement?
No matter what you hear or what a roofing company says, you must pay your deductible for your insurance roof replacement once your claim is approved. Trying to avoid this leads to one of the biggest scams in the roofing industry.
You’ll hear some roofing companies offering to pay deductibles, but this is illegal. Not only is a roofing company paying your deductible illegal, but it is outright committing fraud.
Some homeowners jump at the opportunity when a roofing company is willing to pay their deductible. I promise you don't want to work with a roofer who does this.
I understand that saving money is important, but having a roofing company eat your deductible is not worth committing fraud. That’s why you should NEVER listen to a company willing to pay your deductible.
What else do you pay for when getting an insurance roof replacement?
Now you know you must pay your deductible no matter what. But while everyone must pay their deductible, will you have to pay anything else when getting an insurance roof replacement?
That comes down to your insurance policy and how much money your insurance company gives you. Your roof is covered by one of two insurance policies: Actual Cash Value or Replace Cost Value.
Actual Cash Value policy
An Actual Cash Value (ACV) policy means you'll get the depreciated value of your roof as it stands today. With this policy, the insurance company only has to give you what your roof is valued at the time of the claim.
In this scenario, you obviously won’t get enough to cover the cost of your entire roof replacement. You’ll have to use the depreciated amount you got from insurance and make up the difference out-of-pocket.
It can be tempting to try to find a lower price or even a roof that costs the same amount as your ACV policy gives. However, a cheap roof equals cheaper quality and labor, which sets your roof up for premature roof failure from the start.
Replace Cost Value policy
A Replacement Cost Value (RCV) policy means your insurance company pays what it costs to replace your roof with a brand-new version of itself. With this policy, your insurance company is supposed to give you enough for a full roof replacement.
You’ll first get a check for the actual cost value of your roof while your insurance company holds back recoverable depreciation. After getting the work done and providing proof that it was done per the claim, your insurance company sends another check that covers the rest of the cost.
Remember, your insurance company only pays to restore your new roof to a brand-new version of itself. So, if you want to upgrade certain areas, like going from 3-tab asphalt shingles to architectural asphalt shingles, you’ll have to make up the difference out of pocket.
Why is your insurance estimate lower than your roofing contractor’s estimate?
Even if you have a Replace Cost Value policy, there’s a strong possibility your insurance estimate is lower than the estimate you get from a roofing contractor. This is because the insurance company left off crucial line items, labor costs, or other things a roofing contractor needs to do the job right and be profitable.
You may think that a roofing contractor should be able to do it for the amount insurance gives you, but this isn’t the case for most companies. Every roofing company is a for-profit business that needs to hit a certain profit margin on each job to keep the doors open.
Unfortunately, insurance companies completely ignore a roofing contractor’s overhead and profit. In fact, General Overhead expenses are not included in Xactware’s pricing (the software insurance companies use to determine pricing).
Instead, they add it to the estimate as a percentage of the total bid and the appropriate profit margin. This blanketed approach flat-out doesn’t work and actually opens the door for some roofers to take advantage of homeowners.
I guarantee you’ll be able to find a roofer who’s willing to do it for the amount that insurance gives you. But there’s definitely a reason they’re willing to do it less than other companies.
So, it’s crucial to research the company thoroughly before accepting their lower estimate and do your due diligence to find out why it’s so low.
What are my options if insurance’s estimate is lower than a roofer’s estimate?
Now you know you must pay your deductible for an insurance roof replacement, what else you’ll have to pay for, and why your insurance estimate is lower than your roofing contractor’s estimate. You should never listen to or consider working with a roofing contractor willing to pay your deductible.
The last thing you need is to commit insurance fraud, even if you have a higher deductible. And remember, there’s a good chance your insurance company won’t give you enough money to cover the full cost of your roof replacement.
While this is frustrating, you do have options. That’s why I wrote another article breaking down what you can do when your insurance estimate is too low.
Check out What to Do When My Roof Damage Insurance Estimate is Too Low to learn your options when the insurance company doesn't give you enough money to cover a full roof replacement.
