If a hailstorm damages your roof or siding, your home insurance policy will typically cover the cost of repairs. However, many homeowners are surprised to learn that their insurance company won’t always pay the full replacement cost up front. This can confuse many homeowners because the initial payment is much lower that what it would cost to replace their roof. Instead, most policies follow a two-step payment process—starting with an Actual Cash Value (ACV) payment, followed by the Replacement Cost (RCV) payment after the work is completed.

Step 1: The Initial ACV Payment

After you file a claim, your insurance adjuster will inspect the damage and determine the total replacement cost of the repairs. However, instead of paying this full amount immediately, most policies will first issue a payment based on Actual Cash Value (ACV).

What is ACV?
Actual Cash Value is the replacement cost of your damaged roof or siding minus depreciation. Depreciation accounts for the age and condition of your roof or siding at the time of the storm. Older materials are worth less than brand-new ones, which means the ACV payment is often lower than the total repair cost.

For example:

• If a brand-new roof costs $15,000 to replace but your existing roof is 10 years old, the insurer might determine its current value is only $8,000.
• Your initial ACV payment will be $8,000 minus your deductible.
• Also common with home insurance policies now is a much higher deductible. Typically the minimum deductible now is $2500. It has become very common for the wind/hail deductible to be 1% or 2% of your dwelling coverage. This means that if your home is valued at $300,000, a 1% deductible will be a $3000 deductible for a wind or hail claim.

Step 2: The Replacement Cost Payment

If your policy includes Replacement Cost Coverage, you can recover the depreciation amount—but only after repairs or replacements are completed. Once you provide proof that the work has been done (usually through an invoice from your contractor), your insurance company will issue the remaining replacement cost payment to cover the rest of the repair expenses.

Continuing the example above:

• If your roof replacement costs $15,000 and your deductible is $1,500, your total eligible reimbursement is $13,500.
• Since you already received $8,000 ACV, the insurance company will issue a second payment of $5,500 after the work is completed and documented.

Important Things to Keep in Mind

• Your deductible applies to the ACV payment. If your deductible is higher than the ACV, you may not receive an initial payment.
• Timelines matter. Most insurers require the repairs to be completed within a certain timeframe (often 6-12 months) to receive the replacement cost payment.
• If you don’t complete repairs, you won’t receive the second payment. The insurance company only reimburses you for what you actually repair or replace.

Final Thoughts

Understanding how claim payments work can help you plan your repairs and avoid surprises during the process. If you have questions about your coverage, including whether you have Replacement Cost Coverage or just ACV coverage, it’s always best to review your policy or speak with your insurance agent.

If you need help finding the right home insurance policy or have questions about a claim, Ameriguard Insurance Agency is here to help. Contact us today at 763-767-0522!