15 Mar Actual Cash Value vs Replacement Cost
How many homeowners actually enjoy spending hours of their time pouring over their insurance paperwork? There’s a good chance, if you’re a homeowner, you aren’t the type of homeowner who enjoys this. In fact, you’re probably like the
majority of homeowners who just sign the insurance paperwork because they have to. But, your homeowner’s insurance could actually hurt you in the future because you didn’t read the fine print.
What does the fine print say?
There’s something in most insurance policies called actual cash value. Sounds pretty great, right? Actual cash? Here’s the catch though: actual cash value really means market value. From a homeowners perspective, this could hit your budget pretty hard if you have a claim. For example, if your roof has sustained serious damage and needs to be replaced, your insurance company would only be on the hook for the market value of your roof as it was right before the damage occurred. What exactly does that mean? Let’s break it down:
Actual Cash Value Explained
For the purpose of this example, imagine a huge storm just rolled through central Indiana leaving a trail of hail damage behind. Your roof was one of the worst hit in your neighborhood. In fact, the damage was so significant that the roof needs to be replaced. Your insurance provider even agreed that it needs to be replaced. The estimate for the new roof is a whooping $12,000, but you’ve got insurance, so you’re covered, right?
Well, kind of. With Actual Cash Value, you’re only covered to a certain point. Let’s say before the hail damage occurred your roof was in pretty good shape. The only problem is it was 15 years old, which for most roofs is getting up there. It definitely had a good amount of wear and tear, so it was not worth $12,000. It was maybe worth $4,000. That’s the actual cash value of the roof: $4,000. So, instead of paying the $12,000 for your new roof, the insurance company is actually only on the hook for $4,000.
Replacement Cost: The Insurance Coverage You Actually Want
Let’s go back to the scenario above. You need to replace your roof and it’s going to cost $12,000. The good news: you have a replacement cost policy, which means your insurance coverage will take care of the cost of replacing your roof. Replacement cost means that no matter the wear and tear on your roof, if it needs to be replaced and your insurance covers the reason it needs to be replaced (i.e. hail damage), then your insurance provider should cover the total cost of the replacement.
At Hoosier Contractors, we understand the headache of dealing with insurance paperwork and providers. It can be difficult to get the coverage you need, even if you have a great policy. Our insurance specialists are trained to work with you. They’ll help you fill out the right paperwork and will even work with the insurance provider to get you the coverage you need.
What are you waiting for? Schedule your no-obligation inspection with the superior Indianapolis roofing company today.