What Is Actual Cash Value (ACV) on a Roof Claim?

What actual cash value means

Insurance regulators describe ACV in the same terms: it pays replacement cost minus depreciation ². For a roof, the Iowa Insurance Division puts it plainly: the carrier pays the roof's depreciated value based on its age and condition before the damage ¹.

So ACV answers the question "what was this roof worth the day before the storm?", not "what will a new roof cost?". A five-year-old roof has lost little value; a roof near the end of its life has lost most of it, even if it was keeping the water out.

The formula shows the one number that changes most between claims: depreciation.

What depreciation means for a roof

Depreciation is the value a thing loses as it gets older and wears out. A new roof is worth what it cost. Each year after that, it has fewer years of life left, so it is worth less, even if it still keeps the water out perfectly.

On a roof claim, the insurer estimates how much of the roof's life was already used up before the storm. Regulators describe it as based on the roof's age and condition before the damage ¹.

A roof that was well kept may be judged in better condition than its age suggests; a roof with old repairs, curling shingles or bald patches may be judged worse.

This is why the same storm can pay two neighbors very different amounts. If one roof was 3 years old and the other was 18, the older roof had used up far more of its life, and under ACV the payment shrinks to match.

Types: three ways ACV can show up on a roof claim

Roof endorsements: ACV on the roof only

A policy can cover the house at replacement cost and the roof at ACV.

The Iowa Insurance Division notes that many homeowners policies now include an endorsement, or rider, that sets how a damaged roof will be settled ¹.

Some of these use a payment schedule based on the roof's age or material instead of an adjuster's depreciation estimate.

That endorsement is the line to read before a storm, not after. Look on the declarations page for wording such as "roof surface", "actual cash value roof" or "roof payment schedule", and ask your agent what it pays on your roof at its current age.

Sources: [1]

How it works on a replacement cost claim

ACV also shows up on replacement cost policies, which confuses many homeowners. Many of these policies pay a roof claim in two parts. The first check is the actual cash value.

The money held back for depreciation is paid later, once the roof has actually been repaired or replaced and you send proof of the cost. That held-back amount is called recoverable depreciation.

So an ACV check does not always mean you have an ACV policy. Read the letter that comes with it: it should say whether the depreciation is recoverable, and by what date you must finish the work and claim it.

On a true ACV policy, that depreciation is never paid. Missing the deadline on a replacement cost policy can mean losing the held-back money, so note the date as soon as the first check arrives.

The steps show where people lose money: missing the deadline in step three.

Worked example: the same hail claim, ACV vs RCV

Illustrative numbers, to show the arithmetic only. They are not a price or a typical settlement. A roof with an expected life of 25 years is 15 years old when hail damages it. The adjuster prices a replacement at $16,000. The policy has a $1,000 deductible.

Insurers use their own depreciation methods and schedules, often set out in the policy or a roof endorsement; straight-line age is used here only to make the arithmetic visible. Our claim tool runs this calculation with your own policy figures.

Where to find it: checking your policy

1. Open the declarations page of your homeowners policy and find the dwelling coverage line. It says replacement cost or actual cash value.
2. Look at the list of endorsements for anything naming the roof, roof surfacing or a payment schedule.
3. Check the deductibles: many policies have a separate wind/hail deductible, sometimes a percentage of the dwelling limit ³.
4. If the wording is unclear, ask your agent or insurer in writing how a roof claim would settle today.

Why some people have ACV coverage

• Premiums are probably lower for actual cash value coverage, according to the NAIC ⁵.
• It may be the only option an insurer offers on an older roof.
• For a newer roof, the gap between ACV and replacement cost is small, because little depreciation has built up.

The downsides of ACV on a roof

• Replacement cost coverage pays more if you have a claim ⁵. With ACV, you pay the gap.
• The older the roof, the bigger the gap, even if the roof was keeping the water out.
• A large percentage deductible can wipe out an ACV payment on an old roof completely.
• You may need savings or financing to finish a full replacement after a storm.

What ACV coverage may not pay for

Regulators note that under both ACV and replacement cost there may be exclusions or limits ¹. Common ones to look for in your policy:

• Wear and tear and old age, as opposed to sudden damage from a storm
• Damage from lack of maintenance, such as long-term leaks that were left alone
• Cosmetic damage, such as dents on metal that do not stop it working, if your policy has a cosmetic damage exclusion
• A dollar limit on roof claims, or a separate roof deductible

What it costs you: percentage deductibles and ACV

Many policies have a separate wind and hail deductible set as a percentage of the home's insured value, not of the claim ³. The Texas Department of Insurance gives this example ²:

Put that together with ACV on an older roof and the payment can be small or even zero: if the roof's depreciated value is less than the deductible, there is nothing left to pay.

Hurricane and named-storm deductibles can range from 1% to as high as 15% of the insured value, according to the NAIC ³. Check the dollar figure for your own policy before storm season.

How a roof claim is paid under ACV, step by step

1. A storm damages the roof. You make only temporary repairs to stop more damage, such as a tarp; the Texas insurance department advises against permanent repairs before the claim is handled ².
2. You report the claim to your insurer and take dated photos of the damage.
3. An adjuster inspects the roof and writes an estimate of what it would cost to repair or replace it today.
4. The insurer subtracts depreciation from that estimate, giving the actual cash value.
5. Your deductible is subtracted from the actual cash value.
6. The insurer pays the remainder. You pay the rest of the roofer's bill yourself.

How roof upkeep affects an ACV claim

Depreciation is based on the roof's age and its condition before the damage ¹. A roof with records of regular inspections and prompt repairs gives the adjuster evidence of good condition. A roof with old, unrepaired damage gives evidence of the opposite, and wear and tear itself is often excluded ¹.

Keep dated photos of the roof, the invoice for the roof and any repairs, and inspection reports. They help you show the roof's condition the day before the storm, which is exactly what ACV tries to measure.

When ACV can leave you short

• Your roof is near the end of its expected life, so most of its value has been depreciated.
• You have a percentage wind/hail deductible on a high insured value. In one regulator example, a 5% deductible on a $150,000 home is $7,500, and a $6,500 roof repair would pay nothing ⁶.
• You did not know your roof had an ACV endorsement until after the storm.
• You made permanent repairs before the adjuster saw the damage, leaving less evidence ².

Who sets the rules

Homeowners insurance is regulated by each state's insurance department, not by a federal agency. The National Association of Insurance Commissioners, which brings those regulators together, defines actual cash value as the amount it would take to repair or replace damage to your home after depreciation ⁴.

States differ on details, such as how insurers may depreciate a claim and what they must explain to you in writing. If you think a claim was handled unfairly, your state insurance department takes complaints. This page explains the general term; it is not legal or insurance advice.

ACV vs replacement cost value

Common misconceptions

Myth ACV means I get the roof's market price.

Reality ACV is the cost of a replacement minus depreciation, not what a buyer would pay for the roof.

Myth The deductible is already taken out of depreciation.

Reality No. The deductible is subtracted separately, after depreciation, so on an old roof it takes a bigger share of the payment.

Myth ACV and recoverable depreciation are the same thing.

Reality On a replacement cost policy the insurer may pay ACV first and the withheld depreciation once the work is done. On an ACV policy that depreciation is not paid back.

Your state's rules

Insurance is regulated state by state, and states differ on what may be depreciated and how claims must be handled. Your state insurance department publishes consumer guides and takes complaints.

This page explains the general meaning of the term; your policy wording and your state's rules are what bind your claim. It is not insurance or legal advice.

What to ask your agent or insurer

• Is my roof covered at replacement cost or actual cash value?
• Is there a roof endorsement or roof payment schedule on my policy, and what would it pay on my roof at its current age?
• What is my wind and hail deductible in dollars?
• If I file a claim, will you show me how depreciation was calculated?
• Can I move my roof to replacement cost coverage, and what would it cost?

Keep going

• Storm damage and insuranceHow a roof claim works, step by step
• Hail claim estimatorRun ACV vs RCV with your own numbers
• Storm damage repairGetting the damage inspected and documented
• Repair or replace?When a claim settlement changes the decision

Related terms

Replacement Cost Value

Replacement cost value (RCV) is what it would take to repair or replace damaged property with materials of similar kind and quality at today's prices, without subtracting depreciation for age or wear.

Recoverable Depreciation

Recoverable depreciation is the part of a replacement cost claim that the insurer holds back at first and pays later, once the damaged property has been repaired or replaced and you send proof of the cost.

Insurance Deductible

An insurance deductible is the part of a covered claim that you pay yourself before your homeowners policy pays the rest.

Insurance Adjuster

An insurance adjuster is the person who inspects damage after a claim, decides what the policy covers and estimates what it will cost to repair or replace.

Roof Insurance Claim

A claim on a homeowners policy for roof damage from a covered event such as wind or hail.

Roof Life Expectancy

Roof life expectancy is the number of years a roof covering is expected to keep the weather out under normal conditions, before it needs replacing.

Hail Damage Insurance Claim

A homeowners claim for hail damage to a roof, often subject to a separate wind/hail deductible.

Also referenced from: Roof Inspection Report, Roof Life Expectancy, Insurance Adjuster, Replacement Cost Value, Recoverable Depreciation, Insurance Deductible