What Does Insurance Cover After a Severe Storm?
What Does Insurance Really Cover After a Bad Storm?
Monsoons are here and we’ve all gotten the flash flood warnings over the past few weeks. But the one question many people don’t think about until after is: what happens if my house gets damaged by heavy rainfall? Homeowner insurance expert, Daniel G. Martinez from Prescott, AZ answers some of the most frequently asked questions:
Does Homeowner Insurance Cover Flooding in the Basement?
Unfortunately, no type of home insurance policy will cover damage by heavy rainfall. You must purchase flood insurance through the National Flood Insurance program. If you haven’t already, make sure you purchase it asap! You can contact your insurance agent to see if they sell flood insurance. If they don’t, you can contact the NFIP Referral Call Center at 1-800-427-4661 to request an agent referral.
Does Home Insurance Cover My Roof if it Gets Damaged?
The short answer is yes. However, depending on your coverage terms, you may face significant out-of-pocket expenses. There are two different types of calculations insurance carriers use when determining repair or replacement costs: actual cash value (ACV) and replacement cost value (RCV)
What’s the Difference Between ACV and RCV?
Many insurance companies will pay on the damage to your home using either Actual Cash Value (ACV) or Replacement Cost Value (RCV). It’s important for you to take a look at your homeowners policy to determine how they will pay for any damage on your property. ACV and RCV are significantly different, and could mean more or less out-of-pocket expenses.
Actual Cash Value (ACV) would mean the replacement cost subtracting the depreciation. Or, the fair market value. With ACV, your insurance carrier pays to repair or replace your roof, minus your deductible and depreciation for the age and type of roof. One example of ACV looks like this: You’ve got a roof that cost $30,000, but 10 years later, you’ve got to replace it. The insurance company has a depreciation schedule of $1,000 less every year for your type of roof and says that the ACV is now $20,000. Even more – you’ve got to meet your $1,000 deductible first. This is now an $11,000 out of pocket expense.
Replacement Cost Value (RCV) means the full cost of replacement is paid – without factoring in depreciation. In the same example above, you’d meet your deductible of $1,000 and your insurance carrier would pay the full replacement cost of $30,000.
If you’re worried that you may not have the right coverage to minimize huge out-of-pocket expenses, make sure you schedule a time to sit down with your insurance agent and review your home policy. There are a ton of factors that affect the ACV of your roof, it’s important to get a better understanding of what your best and worst scenarios look like before disaster strikes. You want to be as prepared as possible.