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Recoverable Depreciation Roof: Your Insurance Guide

Updated:

7/12/2024

With over 15 years of industry experience, Valeriu Gurau is the founder of Built To Last Roofing. His extensive knowledge and expertise in the roofing business allow him to provide strategic solutions and ensure exceptional operational performance.

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Straight-line depreciation

This is the most common method, where depreciation is calculated proportionally to the age of the roof. For example, if your roof has a 20-year lifespan and is 10 years old, it would be considered 50% depreciated.

Diminishing depreciated value

This method takes into account the faster rate of depreciation in the early years of a roof's life. This means that a roof will depreciate more rapidly in the first few years than in later years.

Depreciation schedules

Insurance companies often use pre-defined depreciation schedules based on the type of roofing materials and their expected lifespan. These schedules provide a standardized framework for calculating insurance depreciation.

Understand Your Policy

Read your insurance policy carefully to understand how recoverable depreciation is calculated and paid. Look for clauses related to ACV, RCV, and depreciation schedules, and check if your insurance can cover claims.

Document Everything

Keep detailed records of your roof's maintenance, repairs, and upgrades. This documentation can help support your insurance claim and demonstrate the value of your roof.

Negotiate for RCV

If you want to replace your roof with a new one, aim for a settlement based on Replacement Cost Value (RCV) with a recoverable depreciation clause. This allows you to receive the full replacement cost, even if it's paid in two installments.

Get Multiple Estimates

Obtain quotes from several reputable roofing contractors. These estimates can help you determine a fair replacement cost and provide evidence to support your claim.

Consult with an Expert

Don't hesitate to seek guidance from a roofing contractor with experience in insurance claims or a qualified insurance claims specialist. They can help you understand your options, navigate the process, and ensure you receive a fair payout.

Roof Age

From an insurance perspective, your roof depreciates as soon as you install it. This means that the value of your roof decreases over time, impacting your insurance coverage. As a result, your recoverable depreciation grows smaller each year. Once your roof is 20 years old, the insurance company may take a few actions: they might significantly adjust your insurance rates, demand that you replace your roof, or even cancel your coverage and tell you to find another insurance company.

Roof Condition

Even the most well-built roofing systems wear out in time. Insurance companies factor in this natural wear and tear when calculating recoverable depreciation. However, the more you neglect your roof, the faster it will deteriorate. To keep your roof from depreciating too quickly, schedule regular roof inspections and provide regular roof maintenance. This ensures your roof stays in excellent condition and maintains a high cash value.

Newer Roof Products

The roofing industry is constantly evolving, with new products and technologies emerging. If your roof is more than 20 years old, it may be considered obsolete by today's standards, making repairs or replacements more expensive. For example, if you have asphalt shingles, you may find that the manufacturer no longer produces the exact type on your roof which makes replacements more costly. Insurance companies take this obsolescence into account when assessing the value of your roof.

Actual Cash Value (ACV)

This method takes into account the age and condition of your roof. It factors in the depreciation based on its expected lifespan, resulting in a lower payout than the full replacement cost. It essentially represents the actual "used" value of your roof at the time of the insurance claim.

Replacement Cost Value (RCV)

This method aims to cover the full cost of replacing your damaged roof with a similar new one, regardless of its age. However, it usually comes with a recoverable depreciation clause. This means that you might receive an initial payment based on the ACV, and then receive the remaining depreciation amount later once you provide proof of replacement.

When your roof suffers damage, you naturally expect your homeowners' insurance to cover the cost of repairs or replacement cost value. But what about the recoverable depreciation on your roof? What is recoverable depreciation on a roof claim?

In our guide, our team at Built to Last Roofing will discuss this overlooked aspect of the insurance process which can significantly impact your reimbursement.

What Is Recoverable Depreciation on a Roof Claim?

Recoverable depreciation is a term used in insurance to describe the decrease in value of an insured item due to normal wear and tear over time. In essence, it represents the age-related depreciation of your roof. This means that your insurance company won't pay the full replacement cost for your damaged roof, especially if it's nearing the end of its expected lifespan. Instead, they might deduct a portion reflecting its "used" value.

You’ll need to understand the types of recoverable depreciation to maximize your insurance claim:

ACV and RCV: Understanding Key Differences

There are two main ways insurance companies calculate the cost of your roof claim:

Calculating Recoverable Depreciation: Actual Cash Value

The insurance company will calculate recoverable depreciation using one of these methods:

Here's an example of how to calculate recoverable depreciation using the straight-line method:

Main points:

Roof age: 10 years old
Expected lifespan: 20 years
Replacement cost: $15,000

Calculation:

Depreciation percentage: (Roof Age / Expected Lifespan) = (10 years / 20 years) = 50%
Depreciation amount: (Replacement Cost x Depreciation Percentage) = ($15,000 x 0.50) = $7,500

Result:

The recoverable depreciation work on this roof is $7,500. In other words, if the insurance company uses ACV to settle the insurance claim, they would deduct $7,500 from the roof replacement cost, paying you $7,500 initially.

If you choose to use RCV, you might initially receive $7,500, with the remaining $7,500 paid later once you provide proof of replacement.

Important notes:

This example uses the straight-line method, which assumes depreciation occurs at a steady rate.
Other depreciation methods, such as diminishing value, might result in a different depreciation amount.
Your insurance policy will dictate how depreciation is calculated and paid.
The actual cost value you receive may vary based on specific policy clauses, deductible amounts, and other factors.

Recoverable vs. Non-Recoverable Depreciation

Depreciation exists in two types.

‍Here's the key difference:

Types of Depreciation	Cause	Insurance Coverage	Payout
Recoverable Depreciation	Normal wear and tear due to age	Often covered, either as a separate payment or deducted from your initial claim	You might receive the depreciation amount later
Non-Recoverable Depreciation	Outdated technology, design flaws, market conditions, etc	Not covered by insurance	No compensation is provided

In essence, recoverable depreciation is the portion of value loss covered by insurance, while non-recoverable depreciation represents the unrecoverable value loss.

Knowing the distinctions between these types of depreciation helps you understand what you can expect from your insurance company and navigate the claims process effectively.

5 Tips for Successful Recoverable Depreciation Claim

Here are the five most widespread tips you need to know about recoverable depreciation to maximize your claim.

At Built to Last Roofing, we work closely with homeowners to navigate the insurance process, ensure fair reimbursements, and help maximize the payout for your roof claim. Our expertise in roofing, coupled with our knowledge of insurance procedures, allows us to effectively communicate with your insurance company and work for your rights.

Built to Last Roofing: Your Trusted Partner in Roof Claims

Recoverable depreciation is an essential element of homeowners insurance claims. By understanding its nuances, you can better prepare for your claim, negotiate a fair settlement, and secure the financial resources you need to repair or replace your damaged roof. Remember, knowledge is power, and our experts are here to empower you to navigate the complexities of recoverable depreciation with confidence. We’re available 24/7 and have a 99% customer satisfaction rate.