Why Your Claim Payment Came in Lower Than Expected
If you filed a roofing insurance claim and got a check that was smaller than the total scope of loss, you probably ran into depreciation. Most homeowners policies pay out in two installments: actual cash value (ACV) first, then depreciation recovery after the work is completed.
This is called "replacement cost value minus depreciation" and it is standard in almost every modern homeowners policy.
ACV vs RCV Explained
RCV (Replacement Cost Value): What it would cost today to replace the damaged roof with new materials and labor.
ACV (Actual Cash Value): RCV minus depreciation for the age and condition of the existing roof.
Simple example: your RCV for a full roof replacement is $15,000. Your roof is 12 years old. The insurance company depreciates it at 3% per year, so the depreciation is $5,400 (36% of $15,000). Your ACV is $9,600.
Your insurance company sends you $9,600 minus your deductible first. The remaining $5,400 (the depreciation amount) is held in reserve until you actually complete the work.
How to Recover Your Depreciation
This is the part homeowners often miss: the depreciation is yours to keep, but you have to earn it by actually completing the roof replacement.
The steps:
1. Accept the ACV payment (minus deductible) from the insurance company
2. Sign a contract with your roofing contractor
3. Have the work completed
4. Submit proof of completion to your insurance company (final invoice, photos, certificate of completion)
5. Insurance company releases the depreciation check
If you do not complete the work — if you pocket the ACV and skip the replacement — you never get the depreciation. Some homeowners do this and think they are "saving money." They are not. They are leaving thousands of dollars of insurance money on the table.
Depreciation Rates by Material
Insurance companies use different depreciation schedules based on the material and the expected lifespan. Typical schedules:
- 3-tab asphalt shingles: ~4% per year (25-year expected life)
- Architectural asphalt shingles: ~3.3% per year (30-year expected life)
- Metal roofing: ~2% per year (50-year expected life)
- Tile/slate: ~1-1.5% per year (75-100 year expected life)
Your actual rate depends on your specific insurance policy. Read the fine print or ask your agent.
Why Some Claims Are ACV-Only
Some policies, especially older ones or budget homeowner policies, pay only ACV with no depreciation recovery clause. These are called "ACV policies" and they are significantly worse for homeowners when roofs need replacement.
If you have an ACV-only policy, your insurance will pay the depreciated value of the roof and nothing more. The difference between ACV and the actual replacement cost comes out of your pocket.
If you are reading this before filing a claim and you have an ACV-only policy on an aging roof, call your agent and ask about upgrading to RCV coverage before you file.
The Deductible
Separate from depreciation, your policy has a deductible — usually $1,000-$5,000 or a percentage of your home value. This comes off the top of your claim payment and is your out-of-pocket responsibility.
Important: by law in most states, the roofing contractor cannot waive or pay your deductible for you. Any contractor who offers to is committing insurance fraud and would be making you complicit.
What Contractors Need to Know
For roofing contractors doing insurance work, depreciation affects how you bill and how you explain the claim to homeowners.
Timeline for contractor payment:
1. Homeowner pays the deductible at contract signing
2. Insurance sends ACV check (minus deductible) to homeowner (and sometimes mortgage company) — homeowner pays you
3. Work is completed
4. Contractor submits completion documentation
5. Insurance releases depreciation — homeowner pays you the final installment
This is why insurance jobs can take 60-90 days to fully pay out, even if the installation only takes 2 days.
Code Upgrades and Depreciation
Modern homeowners policies often include a code upgrade provision that pays for improvements required by current building code even if the old roof did not have them. Examples: ice and water shield coverage, enhanced nailing patterns, upgraded ventilation.
These code upgrades are typically not depreciated. If a line item on your scope is labeled "Law and Ordinance" or "Code Upgrade," that amount should be paid at full value without depreciation.
The Bottom Line
Roof depreciation on insurance claims is not the insurance company shortchanging you — it is how the policy is structured. The depreciation is yours to collect if you actually replace the roof. The biggest mistake homeowners make is not realizing the depreciation exists and can be recovered. Work with a contractor who understands insurance claims, complete the work on time, submit proper documentation, and collect every dollar your policy entitles you to.