As we are approaching a new year, many Texans are looking over their household finances. It's something we recommend and realize that a lot of fellow Texas homeowners do the same. In talking with Stephen, who called our offices the other day, we discovered a time bomb that may not be a part of your equation for the upcoming year and felt like we needed to let others know of his dilemma. Stephen was looking at his Texas home insurance policy and began to look at a notice that had come in the mail. The insurance company had sent a notification separate from his regular policy documents that indicated that his roof would not be fully replaced in the event of a hailstorm due to its age. How could this be? This is Texas where hail and windstorms are prominent and roof damage almost feels like a right of passage.
Roof Replacement Claims
If you live in the right part of Texas, it may feel like your roof is being replaced from hail almost every year. But for most Texans, this just isn't the case. Even parts of the hail zone known as North Texas have gone almost fifteen years without a significant hail event. But because of the roof replacements that have been prolific as a result of the major storms of the last few years, insurance companies have had to make some significant changes to homeowners insurance policies to stay profitable. One of those changes that many people are becoming aware of is that they are raising deductibles to push more responsibility back on Texas homeowners. This is partially due to the practices of roofing companies not charging for the full deductible on claims, but is also simply due to the sheer volume of roof insurance claims.
However, we are starting to see a new trend emerge from the homeowners insurance companies with respect to the roof claims process. The insurance companies are now pushing more and more homes from roof replacement cost settlements towards an actual cash value claim settlement. This move allows the insurance companies to apply a depreciation factor to your claim payment for your roof replacement. But how the insurance companies are doing this seems to be a bit of sleight of hand. Which is where we found Stephen when he reached out to us.
Roof Payment Schedules
We've talked long and loudly about roof payment schedules for many years now. Many Texas homeowners are finally starting to wise up to this practice. When claims adjusters perform their roof inspection after a claim for roof damage is filed, the process then moves to the settlement process. This process is the same whether the damage is from hail or wind damage. The adjuster is responsible for applying the terms of the policy to the payment for the roof repairs once it is approved. Most Texans assume at this point that they will get a settlement check to hand over to the roofing contractor to get the work done, but this is where the surprises come in for many Texas homeowners trying to repair their home after severe weather storm damage.
Most of the standard homeowners insurance policies now include a provision that stipulates that as your roof ages, the roof replacement coverage on your policy changes. These provisions stipulate that at a certain age of your roof, whether that be five, ten, fifteen, or twenty years, will shift from the full cost of replacement to partial replacement based on its age. Otherwise known as actual cash value. With the cost of the average roof replacement continuing to climb, this can put Texas homeowners in a massive pinch. Especially with the cost of inflation hitting all of us square in the mouth.
Actual Cash Value
If you are like me, and your area has not seen a good hail storm in over a decade it is highly likely that many homes have not had a roof replaced during the time period. If your homeowners policy has a provision that stipulates that the roof replacement coverage changes at ten years from the full cost of roof replacement to actual cash value, you need to stashing away cash. Let's look at the math very simply and quickly.
If the average cost of roof replacement is $20,000 in Texas with an average wind-hail deductible of $3,000, the homeowners insurance company will pay out $17,000. Seems simple and the math can make sense to most homeowners. They may not like paying the $3,000, but it can be a manageable problem with financing and other options available when the roofing claims payout is $17,000.
However, and this is what caught Stephen's eye, if that $17,000 is hit with a 60% depreciation value if your roof age is ten years old or more, the insurance company is now only going to be paying $6,800. Where is the other $10,200 coming from? Your pocket friend. It seems a bit unfair given what insurance costs these days. Stephen couldn't agree more when we walked him through the math.
What Can You Do?
If your roof is really old, like twenty years or more, your options are very limited. We suggest budgeting a roof replacement into your life. No, were serious. But if your roof is less than fifteen years old, it is time to make sure that you understand what you do and do not have for roof coverage on your policy. Different companies handle roof repair coverage differently, and working with a trusted, independent insurance agent who understands Texas can make all the difference in the world.
At Insurance For Texans, our agents offer TRUE Texas Home Insurance to make sure that you get a square deal based on your specific needs. If the age of your roof indicates that we can get insurance to cover the cost of roof replacement, you will get that coverage. Don't be surprised, plan ahead like Stephen so that we can help you avoid a partial roof replacement with True Texas Home insurance.