Texas hailstorms can wreak havoc on cars, landscaping, and the roofs of homes and commercial buildings. If your roof has sustained hail damage that needs repair and you file a claim with your insurer, you may receive payment for far less than it will cost to replace the roof. Attorney Bill Voss explains this common practice, known as recoverable depreciation, and how it should be applied to an insurance claim.
How Recoverable Depreciation Affects Your Hail Damage Roof Claim
Many property insurance policies will include recoverable depreciation, which is an amount for the lost value of your insured item. The easiest way to understand recoverable depreciation is that your insurer provides two separate payments: one to begin repairs, and one when the insurer has proof that repairs have been completed.
For example, let’s say the cost to replace your entire roof is $12,000. The insurer is not required to give you $12,000—it is only required to pay for the value of your old roof. If your old roof was ten years old, cost $10,000, and had a useful lifespan of 20 years, your roof has lost $500 in depreciation per year. This means that your claim is worth $5,000, since your roof would have had only half its original value left.
However, if your insurance policy allows you to recover the depreciation on your lost items, the insurer is required to pay you an additional $5,000 once the work has been completed.
A roof claim with recoverable depreciation generally involves the following details:
- Initial payment is received. The policyholder will receive a check from the insurance company for the actual cash value minus the policyholder’s deductible. (In the above example, this would be $4,500 if the policyholder’s deductible is $500).
- The repair is completed. The policyholder uses the insurance money to perform roof repairs and the contractor’s invoice is submitted to the insurance company.
- Depreciation payment is sent. Once the insurer has proof that the roof has been completed, the insurance company releases the recoverable depreciation payment (in the above example, $5,000) to resolve the claim.
- Roof credits are awarded. Some insurers offer new roof credits to policyholders who replace their entire roofs, so it is always worth checking to see if you could be owed a discount.
It is worth noting that some claimants may be tempted to keep the initial payment and not perform adequate repairs. Unfortunately, this will lose them money in the long run, since any future roof claims will be denied. Recoverable depreciation is not only a way for policyholders to get full payment, it proves to the insurer that repairs were actually completed on a claimed item.
If you are having trouble collecting the full amount of depreciation from your insurer, fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.