UNDERSTANDING WHY THE RECOVERABLE DEPRECIATION CHECK IS OWED TO THE ROOFING COMPANY

Insurance claims can be so confusing for homeowners who have never been through the process. Many times, homeowners ask us, “What is recoverable depreciation? Do I get to keep those funds?”

It’s a pretty simple answer that requires a little bit of understanding of the entire claims process.

For over 12 years, Peachtree Restorations has helped homeowners understand everything they need to know about filing a roof damage insurance claim and, in this article, we will focus on your recoverable depreciation.

What is recoverable depreciation?

Roof depreciation is the amount your roof’s value has decreased over time, usually due to wear and tear. Your insurance company calculates depreciation when your claim has been filed to determine how much value the roof has lost since it was installed. They consider three main factors:

  • The age of your roof
  • The condition of your roof
  • The Actual Cash Value of your roof

Depending on the type of insurance policy you have, the lost value can be recovered through recoverable depreciation. This is usually the final check the insurance company sends after the work has been completed.

Getting Recoverable depreciation depends on the type of insurance policy you have.

Which insurance policy offers recoverable depreciation?

Since getting recoverable depreciation depends on your type of insurance policy, it’s important to understand which type of policy you own.

ACV Policy

An ACV policy stands for Actual Cash Value. With this policy, you’ll get a payout for the depreciated value of your current roof.

This means the insurance company only pays out the roof's current value as it stands today. Once your claim is approved, you’ll get a check for the actual cash value and pay the cost difference for your new roof out of pocket.

RCV Policy

An RCV policy stands for Replacement Cost Value. This policy ensures your insurance company pays for your entire roof replacement.

But unlike an ACV policy, you don’t get a check for the full amount upfront. You’ll get the actual cash value of your roof first, and the depreciated part after the job is completed.

How does recoverable depreciation work for a roof damage claim?

When your roof damage claim is approved, the insurance company gives you an estimate for the scope of work required to restore your current roof to a brand-new version of itself.

First, you’ll get a check for the actual cost value of your roof while the insurance company holds back the recoverable depreciation.

After finding a roofing contractor, you’ll get anything missing on the claim supplemented and your roof replaced once everything is completed. Once the job is done, you or your roofing contractor will provide proof that the scope of work was done per the claim.

As long as everything checks out, the insurance company sends another check with the recoverable depreciation that covers the rest of the new roof’s cost. But if you don’t get the work done or don’t follow the scope of work exactly, the insurance company doesn’t have to give you the depreciated part of the claim.

This leaves you paying out of pocket and can lead to inadvertently committing insurance fraud.

How to avoid committing insurance fraud when it comes to recoverable depreciation

Your roof must be replaced in accordance with your claim paperwork to get recoverable depreciation. That’s why the insurance company requires proof that the work was done correctly and in line with the estimate.

However, failing to do so, and then requesting the check for depreciation can lead to insurance fraud. Some homeowners do this inadvertently because the roofing contractor didn’t follow the scope of work correctly.

By leaving items off on purpose and trying to keep the extra money; you’re committing insurance fraud. This is why a reputable roofing contractor asks to see your insurance paperwork.

They do this to ensure they’re following the claim correctly, so your roof gets everything it requires. An experienced roofer will even help you supplement anything that insurance leaves off.

Why does the Roofing Contractor get the depreciation check?

After learning how the depreciation check works, you’re ready to understand why the roofer gets it. Just like a normal roof replacement, the first actual cash value check for an insurance roof replacement acts like a deposit for the materials.

If you weren’t getting a new roof through insurance, you would pay whatever is left after the deposit once the job is done. For insurance, the second depreciation check covers the rest of the cost, which is why the roofer gets it.

They get the check simply because it’s what they’re owed for completing the job like any other service. Now, you won’t have to give it to the roofer if you go ahead and pay for the rest before receiving the check.

In this scenario, the roofer gets their payment sooner, and you keep the depreciation check when it’s sent to your home or bank account. Both ways are fine, but the important thing to remember is that the depreciation check is specifically meant for the provided roofing services.