Did you know that only 59% of homeowners are aware their home insurance will cover tornado damage?
In 2023, Forbes surveyed 2,000 homeowners to find that the majority of homeowners weren’t sure of what they were actually paying for with their insurance.
So, if that’s you – you’re not alone.
Helping over 300 customers with insurance claims each year, we at Linta Roofing find that our customers can feel a great deal of stress from “jargon overload” when they have roof damage. And we can attest to the fact that insurance companies speak their own language.
However, it is unfair to leave you in the dark about your insurance policy – especially if you have roof damage that needs immediate attention. So we compiled a glossary of insurance terminology that simplifies some of the jargon our customers are unfamiliar with. This way, you can read through your insurance paperwork and understand exactly what you need to know.
We at Linta Roofing are always happy to assist our customers through the insurance process but we also stand on this truth “to be clear is to be kind”. So let’s break down some of the most common insurance terms you need to know as you move through the insurance process.
Glossary of Insurance Terms You Should Know Before Making a Claim on Your Roof
Replacement Cost Value (RCV):
RCV or replacement cost value insurance policies evaluate the damage to your roof based on current market values.
For example - If your roofing project is a total of $10,000, and the depreciation value is $2,000, your insurance company would pay out $8,000 at the beginning of the project. Once the project is complete, they will release the $2,000 of depreciation that was withheld from the first check amount. Ultimately totaling the funds from your insurance to $10,000, covering the cost of the project. In this scenario $10,000 is the Replacement Cost Value.
Depreciation:
The amount the loss is valued by, depending on the age of your roof. This is calculated by taking the expected lifespan of your roof and subtracting the number of years it was in good condition before you incurred loss. Depreciation is recoverable when you have an RCV policy, but non-recoverable with an ACV insurance policy.
- Recoverable Depreciation: Refers to the portion of depreciation withheld initially by the insurance company but later reimbursed to the policyholder once repairs or replacements are completed.
- Non-recoverable Depreciation: Refers to the portion of depreciation that isn't reimbursed by the insurance company, typically because repairs or replacements haven't been made or because the policy doesn't cover full replacement costs.
It is important to note that under any insurance policy, the homeowner will always be responsible for paying their deductible. Meaning that RCV policy holders will only pay their deductible, while ACV policy holder will pay the depreciated amount and their deductible.
Actual cash value (ACV):
ACV or actual cash value insurance policies reflect the value of damage after depreciation has been removed. This means that if you have damage on a 15 year old roof that should have lasted for 30 years, your insurance will depreciate its value by 50% or whatever percentage is left for the life of the roof. This reflects what the value would be if the roof was not damaged.
With ACV insurance policies, depreciation is non-recoverable.
For example - If your new roof is $10,000, and the depreciation value is $2,000, your insurance company will pay out $8,000.
Deductible:
A deductible is the predetermined amount that a homeowner will pay out of pocket at minimum. There are two types of deductibles: A named storm deductible and an all other perils deductible. Based on the damage to your roof, your claim will fall under one of the two possible deductibles.
Declarations page:
Your declarations page is an overview of your insurance policy that is provided by your insurance carrier. On this page you will find all the details of your agreement including how your insurance works, what they will pay for, what they won’t pay for, their duties when a claim is filed, and your responsibilities when a claim is filed.
The policy document itself can be quite long, this page summarizes all of those details. Your declarations page is where it will state whether you have an ACV or RCV insurance policy. It is good to keep this page in a safe place because in the event that you have damage to your roof, your roofer will want to look through this page together to figure out what the best solution is for your home.
Field Adjuster:
A Field Adjuster is someone from your insurance company who will come out to your home to physically inspect the damage on your roof. They will document any damage they see and make suggestions for repairs. It is important to know that in most cases, the Field Adjuster does not make the final decision on whether or not you will be approved.
The Field Adjuster will send over everything they’ve documented to be reviewed by a Desk Adjuster.
Desk Adjuster:
They assess claims remotely by reviewing documentation, photos, and other evidence submitted by the field adjuster to determine the extent of coverage and settlement amounts.
Insurance Agent:
Your insurance agent is the person brokering the transaction between you and your insurance carrier. They will typically help you get your policy in order. However, when you file an insurance claim, your insurance agent is rarely a part of this process and has little to no decision-making power.
Insurance Carrier:
Your insurance carrier writes your policy and issues coverage to your home in the event of loss.
A few well-known examples of insurance carriers:
- State Farm
- Allstate
- Homeowners of America
Your insurance carrier will make the final decision on whether your claim is approved or not. If you do not know your carrier, you will find that information on the declarations page your agent provided you.
Claim:
An insurance claim is a formal request for your insurance carrier to provide compensation or coverage for a policy event or loss.
Insurance:
Insurance is a means of protection against financial loss in the event of damage to your home. This is in the form of an arrangement or contract where one party agrees to compensate another party, in exchange for a premium, against certain unforeseen and unfortunate loss.
Premium:
An insurance premium is the amount a policyholder pays either year on year or month to month to retain coverage for their home.
Understanding Insurance Terms Will Help You Make Informed Decisions
Understanding confusing terminology insurance companies use can be an extra hassle in the event of loss. Not only can it become overwhelming, it may deter you from making an insurance claim when you could be covered by one!
Knowing the simple definitions of common insurance terms will be empowering for you as you move forward with your roofing project. We at Linta Roofing always suggest having a trusted roofer help you through the insurance process as they want the same thing as you - a comprehensive solution for your roof. Not merely a band aid but a sturdy roof that you can trust.
Whether you’re curious about how insurance companies determine roof costs or if there is anything else you should know before you file an insurance claim, we at Linta Roofing are proud to be your trusted source of information for all roof-related questions.
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