Colorado is second to Texas when it comes to homeowner roofing insurance claims. Roofs in Colorado are subject to relentless winds, fluctuating temperatures, UV rays, and Colorado's notorious and highly damaging hailstorms.
If you're a homeowner in Colorado, there's a chance you'll need to replace your roof at some point soon.
For most homeowners, a roofing claim is likely the first claim they'll have to make on their property. ACV? RCV? Class 4? Modern homeowners insurance is an alphabet soup of different codes and jargon, which can be confusing to anyone other than the insurance agent.
If your roof is damaged and needs repaired or replaced, you will want to understand a few basic principals to avoid missing out on the full benefit of your insurance claim.
Common Roofing Insurance Terms
ACV vs. RCV
You're likely to see the terms ACV or RCV on your insurance claim. ACV stands for actual cash value while RCV stands for replacement cost value. In an ACV policy, the insurer agrees to pay for your roof repair or replacement, minus the deductible and depreciation. In an RCV policy, the insurer agrees to pay for your roof repair or replacement, including roof depreciation, once you've met your deductible.
It was only a few years ago that most insurance carriers operated on an RCV basis. With Colorado's real estate surge, more houses combined with more frequent damaging storms in hail-prone regions resulted in many insurance companies switching to ACV.
Which policy is better?
ACV typically has a lower monthly premium while delivering higher out-of-pocket costs when making a roof claim due to hail or wind.
RVC plans typically have a higher monthly premium, but because depreciation is covered, you'll pay much less out of pocket if you need to make a claim.
Homeowners should sit down with their insurance provider to discuss the unique advantages and disadvantages between ACV and RCV policies for their specific roof and its age.
Many carriers may want to place you in an ACV policy instantly. Before you sign, ask about RCV policies and weigh the pros and cons of your unique situation.
"There are likely to be some significant changes in underwriting and insurance policy terms over the next few years," said Alan Parks, Owner of Roofcorp of Metro Denver.
"The continued move towards ACV policies has the potential to increase homeowners' out-of-pocket expense significantly. In many cases, insurance companies may no longer offer RCV policies, even if their customer is willing to pay additional premiums," Parks added.