AFTER A HAILSTORM: DO I HAVE ROOF REPLACEMENT COST?

Hailstorm season has already started for us here in Colorado.  Hail, in our state, usually occurs between May and August.  Just last month, we had hail ranging from 1” to 4.5 inches that hit in multiple zip codes. 

As an insurance agent with over a decade of experience in Business Insurance and Investors policies, I will explain how to protect your investment property with the proper roof coverage.  When I review policies for investors from different insurance carriers, I often find a large depreciation schedule built into the insurance policy for wind and hail losses.   In an active hail state like Colorado, it’s imperative that property investors understand the importance of having the correct roof coverage on their insurance policy. 

According to the NICB (National Insurance Crime Bureau) report, from 2017-2019 Colorado was ranked #2 in the United States for hail claims.  In our state, we can realistically count on having a hail claim every 5 years. Knowing that this state has such a large propensity for hail and severe weather, I found it important to share my experience and knowledge with you.   

Let’s start out with the importance of Replacement Cost coverage vs Actual Cash Value coverage for the roof of your property.   Replacement Cost is a type of coverage that replaces the current roof with a new roof without deduction for depreciation.  This means that the current roof, no matter how old, will be replaced with a new roof, minus the deductible within the policy.  This option represents the most preferred coverage properties should have in a policy. 

Actual Cash Value is a type of coverage that pays for a depreciated value of a roof, minus the deductible.  This can cause many problems to investors as the depreciated value can be a judgement call by the claims representative or fixed schedule within the policy form.   Let’s look at an example below to help show the difference in a claim settlement based on a 10-year-old roof.

If you have Actual Cash Value endorsement coverage on your investment property and would like to calculate the depreciation, you can go to: https://www.claimspages.com/tools/depreciation/roofing/asphalt-architectural-shingles/.

In the above example the difference in one hail loss/claim would be an additional $17,500 out of pocket expense to the property owner.  If the insured is aware of the depreciation deduction for hail losses, it should be included in their annual budget.  We are only including Roof Replacement and not including the repair cost for gutters, siding, windows, etc.

When I review policies with the Actual Cash Value endorsement, I also give my clients an insurance estimate of what it would be, if the policy had the Replacement Cost Coverage.  Often the cost difference is minimal, compared with the depreciation deduction.

After a large hailstorm, knowing the type of coverage you have on your roof is very important.  If you have hail damage and file a claim with your insurance carrier, I strongly recommend using a local roofing company.  You will notice after a major storm there will be a lot of roofing companies from out of state that come to Colorado.   When you select your contractor for the roof replacement/repair, I suggest following the suggestions offered through #NoRoofScams campaign

Feel free to contact me to review your policies coverage, to make sure your investment properties are properly protected.   Understanding your policy and how claims will be handled is probably the most important part of your insurance policy.   Let me assist you with that process.  

*References:  http://www.rmiia.org/downloads/2017-2019HailForeCAST.pdf  Page 4 chart of largest hailstorms by State

https://doi.colorado.gov/insurance-products/homeowners/renters-insurance/being-prepared/after-a-hail-storm-insurance-faqs