Is Your Roof Over 10 Years Old? Here’s What You Need to Know About Insurance Changes
Many homeowners don’t realize that after about 10 years, insurance companies often stop offering Replacement Cost Value (RCV) policies for roofs and switch to Actual Cash Value (ACV). That means they’ll only pay for the depreciated value of your roof instead of covering the full replacement cost. Let’s break this down so you can plan ahead.
What Happens When Your Policy Changes?
Mortgage companies typically require homeowners to maintain insurance coverage on their property. If your insurance company switches your policy to ACV and you can’t afford to cover the depreciation, you might not have enough coverage to satisfy your lender's requirements. This could lead to issues with your mortgage provider, potentially forcing you to find alternative coverage or pay for additional protection out of pocket.
With an RCV policy, your insurance company pays the full replacement cost of your roof minus your deductible.
With an ACV policy, they subtract depreciation, so you end up paying more out of pocket.
How Much Would You Owe?
Let’s say you own a $250,000 home and your roof replacement cost is $15,000. You have a 1% deductible, which means you must cover the first $2,500 no matter what.
But with an ACV policy, the insurance company also factors in depreciation. Most roofs last 20 years, and yours is already 10 years old. That means your roof has lost half its value in the eyes of the insurance company.
Here’s how the math works:
Replacement Cost: $15,000
Depreciation (10 years/20-year lifespan = 50%): $7,500
Insurance Pays: $15,000 - $7,500 = $7,500
Your Deductible: $2,500
Total Out-of-Pocket Cost for You: $7,500 + $2,500 = $10,000
How to Prepare for a Roof Replacement
1. Start Saving Now If your roof is over 10 years old, you should start setting aside money now. A good rule of thumb is to save $1,000–$2,000 per year so you're not caught off guard when the time comes.
2. Consider Financing Options If you don’t have enough saved when your roof needs replacing, you’ll need to look at financing. Here are a few options:
Home Equity Loan or HELOC – This can be a good option if you have equity in your home. Interest rates are usually lower than personal loans, but remember, your home is collateral.
Roofing Company Financing – Many roofing companies, like Bunton Roofing, offer financing plans with competitive rates.
Personal Loan – If you don’t have home equity, a personal loan can help, but interest rates will be higher.
0% APR Credit Card – If you qualify, you could finance a portion of your roof with a 0% APR credit card and pay it off before the promotional period ends.
Final Thoughts
The key takeaway here is to plan ahead. Don’t wait until your roof starts leaking to figure this out. Check your insurance policy, get an estimate from Bunton Roofing, and start saving now so you can avoid financial stress when the time comes.