Your Home Insurance Policy and Your Roof: What to Know About Your Existing Policy and What to Look for When Reviewing or Shopping for a New One

Home insurance policies in Texas are changing and where there used to be 3 different home insurance policies allowed to be written in Texas, there are now close to 300 options allowed. If you’re a homeowner, it’s important that you keep up with these changes, review your existing policy to understand exactly what your insurance covers and thoroughly review any revised or new policies.

The Insurance Business

Make no mistake that the insurance industry is a business. And while an insurance company cares about your roof (it protects your home from the elements and expensive interior damages), they must manage the money they take in … and the money they pay out. In doing so, many insurers are becoming more restrictive with homeowners’ roof coverage, especially in significant hail storm damaged areas of the country like Texas.

It’s up to you, the homeowner, to understand your policy and ensure that your insurance carrier covers everything required by your particular policy.

Deductibles

Your home insurance policy includes a deductible, an amount you agreed to pay before the insurance company will pay anything on a claim. Decades ago, these deductibles were as low as $250 or $500, but today they’re anywhere from a set amount of $1000 to $5000 or 1% to 5% of the insured value of your home. Typically, the higher your deductible, the lower your premium, and the deductible is applied to each claim.

After hail storms in North Texas, you’ll see some roofing contractors offering to "waive," "eat” or “cover" a home insurance deductible or install a new roof “at no cost to you.” Please be aware that covering a deductible is insurance fraud if a contractor and/or homeowner falsify an invoice, a proposal, a loss summary or any other pertinent documents relating to the payment of an insured loss in order to circumvent the payment of a deductible.

Replacement Value … or Not?

Some insurance companies have dialed back the roof coverage portion of their home insurance policies, especially on older roofs. Rather than offer full “replacement cost value” (RCV), many policies now offer “actual cash value” (ACV) or “roof payment schedules” (RPS - a sliding unrecoverable depreciation scale).

What’s the difference? RCV is what most homeowners are accustomed to (and prefer); with it, insurers pay all costs to make your roof whole again without factoring in depreciation, once you’ve met your deductible and incurred the cost of having the work performed. In contrast, with ACV (or an RPS schedule included in a RCV policy) your insurer pays to repair or replace your roof, less your deductible AND less depreciation for the age and type of your roof.

Make sure you understand whether your policy covers the full replacement value of your roof … or actual cash value, especially if you have an older roof.

Cosmetic Damage

Another trend is for insurance policies to exclude “cosmetic damage,” which is physical damage such as marring, denting or pitting that affects the appearance but not the intended function of your roof (which is to prevent the penetration of water into your home). This limitation can be a significant problem for homeowners, especially those with metal roofs.

It’s also a concern for those with shingle roofs who have metal accessories, such as drip edges, vents and pipe jacks. While your carrier may pay for the removal and replacement of your roof shingles and underlayment, the metal accessories that are excluded could cost you hundreds of additional dollars.

What happens to the market value of a roof (or parts of a roof) that looks awful but has been deemed to have only cosmetic damage? How do you handle the strict rules your homeowner association (HOA) may have about a property’s appearance? And while a dent or crack may not lead to immediate leaks, what happens to that roof over time? Know what your policy covers and whether it excludes cosmetic damage.

Filing a Claim

Unlike car insurance, your specific policy’s rate will not increase because you made a claim. A region’s rates may increase because it experienced a large, expensive storm, but Texas law prevents insurance companies from increasing your specific policy because of a claim (or two or three) that you filed.

Remember that if you have damage you don’t get taken care of, a later claim could be denied because you failed to maintain your home. Also remember that your insurance deductible applies to each claim; in other words, it isn’t an annual deductible like your health insurance policy.

Tips to Protect Yourself and Your Roof

  1. Don’t make any assumptions when it comes to your existing, revised or new homeowner’s insurance policy. Read your policy, ask questions and know what your deductible is, whether your roof has RCV or ACV coverage, if your policy excludes cosmetic damage and other details.
  2. Carefully compare policies. Here’s a helpful online comparison tool you can use: http://www.opic.texas.gov/residential-property/compare-policy-coverages/homeowners
  3. Once you have narrowed down the policies you’re considering, you can use this helpful worksheet to compare apples to apples: https://www.tdi.texas.gov/consumer/documents/howorksheet.pdf
  4. Maintain your home’s roof and document any repairs, maintenance, damage or inspections.
  5. Only work with local, reputable roofing contractors. The state of Texas does not have any licensing requirements or a state licensing mechanism for roofing contractors or general contractors, so it’s critical that you thoroughly research any contractor before hiring them. You can get a list of questions to ask and more consumer awareness resources to help at www.ntrca.com/advice and www.ntrca.com/consejos.