How Does the Claims Process Work?
If the adjuster determines there is damage when he meets with your contractor, it usually takes about a week (although in some cases it could be same day) you will receive a list of damages the insurance company has agreed to pay for, along with your first check.
This is the ACV (Actual Cost Value) check. This represents the fair market value of your roof today. Much like a car, a 10-year-old roof is worth less than a new roof, and the difference between those two amounts is called depreciation. So, the ACV is the cost to repair or replace the damaged property, minus depreciation.
The ACV plus the depreciation (which you will be paid AFTER the work is done), equals the RCV (Replacement Cost Value). Most storm damage contractors will agree to perform the work for the RCV amount paid by insurance, whatever that amount may be. So, your only out of pocket expense will be your deductible.
So, for example, let’s say you have a 10-year-old roof, and the actual cash value of that roof is $8,000. Let’s also assume it will cost $15,000 to get your roof replaced with a new roof of like kind and quality (that would be the replacement cost value or RCV). The $7,000 difference represents the depreciation. The age and condition of the roof are considered when calculating this depreciation. The older the roof, the higher the depreciation amount.
The insurance company will write you a check right away for $8,000 (ACV). If you do choose to have your roof replaced, then once the work is complete, your contractor will submit a certificate of completion to the insurance company for the work that was done. At that point, your insurance company will release your depreciation payment. Once received, you will either sign that check over to the contractor or deposit it into your account and issue a personal check to the contractor for the remaining balance of the work.
Keep in mind that when the work is completed, the insurance company will issue a check for the recoverable depreciation (there may also be non-recoverable depreciation in some cases, but that is beyond the scope of this article- please ask your project manager to explain) only if the total expenses are equal to, or greater than the total settlement. Many people never get the final depreciation payment because they do not understand the process or the contractor, they chose didn’t understand the proper procedures. When this happens, you can lose thousands of dollars.