Why is the insurance check smaller than the roof estimate?
A roof claim is usually paid in two checks. The insurance company writes an estimate for the replacement cost of the roof, called the RCV, then subtracts your deductible and depreciation based on the roof's age. The amount left is the actual cash value, or ACV, and that is the first check. When the work is complete and the final invoice is submitted, the insurance company releases the recoverable depreciation as the second check.
RCV: replacement cost value
When a person files a storm claim for wind or hail and the insurance company approves it, the adjuster writes an estimate for the damage to be repaired. The total amount of the damaged property is the replacement cost value, or RCV. It is what the property, mainly the roof, is worth in brand new condition.
ACV: actual cash value
The insurance company then subtracts the deductible, which the homeowner pays to the contractor, and depreciation, which is based on the age of the property. The remaining amount is the actual cash value, or ACV. This is the amount of the first check.
Supplements
In many cases the insurance estimate misses certain items. The contractor submits these as supplements to be paid. A supplement may be paid as a separate check, or it may be included with the depreciation check.
Recoverable depreciation
Once the work is complete, the contractor submits a final invoice to the insurance company for all of the work that was done and asks for the depreciation to be released. The final invoice should match the amount the insurance company agreed to pay. The insurance company then releases the recoverable depreciation.
Non-recoverable depreciation
If a policy has non-recoverable depreciation, that amount is not paid by insurance and is the homeowner's responsibility. It is usually found on items like fencing and decking, but some carriers write policies with non-recoverable depreciation on the roof in exchange for a lower premium. Allstate and Progressive are among the companies that commonly carry it on roofs, so it is best for the homeowner and the contractor to know about it and agree on how to handle it before any work begins.
Related questions
How long does it take to get the second check?
The second check is released after the final invoice is submitted, so it usually arrives a few weeks after the work is done. Supplements can add time.
Can I keep the first check and not replace the roof?
You may be able to keep the ACV payment, but recoverable depreciation is only paid once the work is completed and invoiced. If your mortgage company is named on the check, it will usually require the repairs to be made.
Who submits a supplement?
The contractor submits the supplement to the insurance company, usually with photos of the items that were missed.
