Calculating Insurance Payout
Insurance companies use a simple calculator, and so can you. See if filing a claim is worth it.
Homeowners insurance is one of those things you have to have if you own a home. Knowing how and when to use it — that’s the challenge.
Because it’s so confusing, you may be afraid to use the services you’ve been paying for. You may have heard things like, “You might lose your discount if you file a claim.” Or, “You may lose coverage entirely if you file a large claim or file too many claims.”
As scary as that may sound, you won’t be punished for making an insurance claim for roof damage. Keep reading to learn when it’s safe to file a roof claim and five factors that affect your claim.
When to File a Roof Claim: Understanding Your Policy
The purpose of homeowners insurance
The purpose of homeowners insurance, like other types of insurance, is to get you back to status-quo if an unexpected loss occurs. You pay a monthly or yearly premium in exchange for their promise to put you back where you were before the loss.
In other words, you can’t make a profit off your insurance company.
That’s why, when a car is totaled, they’ll only pay what the car was worth at the time of the crash and not what you paid for it when it was new.
Now when it comes to homeowners insurance, you can opt for what’s called “replacement cost” coverage.
With replacement cost coverage, the insurance company is obligated to replace your roof at today’s cost, not just pay what your old roof was worth.
Make sure you understand what losses are covered
The most common unexpected losses for a home (or any building) are fire, water, or storm damage.
Fire and water damage are sometimes avoidable. Like when your toilet backs up and floods your home, or a candle is left unattended. As you might guess, insurance companies try to minimize avoidable risk.
That’s why, if a homeowner’s behavior creates added risk, they may not want to cover that home.
Or if you live in an area that is prone to certain perils, they might raise the rates to offset the risk or exclude certain coverages.
Roof damage from a storm is NOT avoidable, so it’s not measured in the same way.
That’s key!
If you file too many water claims, your insurance company will drop you or raise your rate. Why? Because that can be avoided with good maintenance.
But filing a claim for unavoidable, sudden damage — like hail or wind damage to a roof — doesn’t count against you in the same way.
Factors that Affect Your Roof Claim
There are 5 factors that can affect how an insurance company deals with your claim:
How many home insurance claims have you filed in the recent past (last 1-5 years)?
What’s your deductible?
How badly was your roof damaged?
How much is the roof worth? (Did you opt for replacement cost coverage?)
How competent are you or your advisors at getting claims approved?
How many claims is too many claims?
It’s not unusual for a homeowner to file one or two claims every 10 years or so. But someone who files a claim every year or two is going to get slammed with higher rates. They may even get dropped after a while.
The secret is to avoid filing claims for things that aren’t covered, or for things you can handle on your own.
What’s your deductible?
Before filing a claim on your roof, make sure it’s for a covered expense. Then, consider the risk/reward of adding another claim to your history.
If your deductible is $2,000, and your repair is only going to cost $1,500, your claim won’t be covered — but it will stay on your record for three years. Even if the repair is $2,500, it might not make sense to make a claim.
The more insurance claims you have on your record, the more of an insurance risk you are. To keep your rates low, you don’t want to be seen as a high risk.
How badly was your roof damaged?
Again, consider the risk/reward of making a claim. If the damage isn’t too bad, you might be able to fix it for less than your deductible. And by not submitting the claim, you keep your risk profile low.
How much is your roof worth?
Just like a car, a roof will depreciate with age. A 15-year-old roof that was rated for 20 years isn’t worth as much as it was when it was new.
When reviewing your policy, check to see if you’re covered for the Actual Cash Value (ACV) or Replacement Cost Value (RCV).
Lots of people opt for the Actual Cash Value coverage because the monthly premiums are lower. But that coverage will only pay for what the roof’s worth at the time of the loss. The savings might not be worth it if a bad storm leaves you needing a new roof.
How competent are you (or your advisors)?
It pays to have an expert on your side. Working with a roofer who’s used to dealing with insurance companies can drastically reduce your stress levels. They know the information insurance companies need to be able to process a claim quickly and can advocate for you when questions come up.
What If I Lose My Discount or Worse?
Depending on the scenario, losing a discount or losing coverage isn’t necessarily a bad thing. A little simple math can help you decide what makes sense for your situation.
For instance, what if your insurance covers $20,000 towards your new roof, and you lose your $200 annual discount as a result? How many years would you have to use that discount to outweigh the benefits of the $20,000 new roof?
101 years! That’s hardly worth quibbling over.
Without that discount, your rates will only go up $200 per year. Based on the math, you still come out ahead.
And if the insurance company decides to drop you because of the claim, there’s always another insurance company that will insure you at reasonable rates.
In fact, they’ll likely appreciate the fact that your roof has been replaced and is less likely to need work in the near future — which means your rates won’t go up as much as you fear.
Bottom Line
A roof claim can be one of the more expensive claims you’ll make on your house. And yes, dealing with insurance companies can seem overwhelming.
