What is a Roof Payment Schedule? Many homeowners may have heard this term, but what does it mean? In layman’s terms, a roof payment schedule is when your insurance company pays you less for the replacement of your roof as it ages. In the industry, we call this amount you receive when recovering from a roof loss, Actual Cash Value (ACV). You receive the estimated actual value of your roof as it stands (or stood at the time of loss), not the amount it would require to replace your roof in full (less your deductible).
Insurance companies have paid out a ton of roof claims in Colorado. Therefore, in order to stay competitive on premium pricing, most offer a ‘Roof Payment Schedule’ endorsement which lowers the cost of the policy because the insurance company won’t have to pay so much out when your roof is destroyed by wind or hail. I’ll break it down below.
Let’s say your roof is comprised of asphalt shingles that are five years old. A roof payment schedule would pay less each year as the roof ages. With a realistic roof schedule, your insurance company would pay you 85% of the full replacement cost of your roof at five years of age. If it was 10 years old, 70%, and so on, down to about 25% for really old roofs. In your scenario, let’s say you have a $2,500 deductible, and your roof replacement will cost $20,000. 85% of 20k is $17,000, less your $2,500, which comes to $14,500 you will be paid for your $20,000 roof replacement. So you end up paying a total of $5,500 after all insurance proceeds are paid out. Make sense?
The thing is, in most cases, adding a roof payment schedule will only save you a few hundred dollars on your annual policy. Let’s say you save $300 per year to take on a roof payment schedule. It would take ten years to recoup the additional $3,000 you have to pay on your five year old roof. Does this sound like a good deal? Likely not.
Here’s the kicker, in 2023, in the great state of Colorado, many insurance companies are automatically switching their insureds to a Roof Payment Schedule or an ACV policy on the roof. Many without notice. And not just old roofs, but ALL ROOFS! Sound good to you? Not so much.
Ask your agent if you will be switching to an automatic roof payment schedule this year. If so, I recommend checking your options on keeping a standard full Replacement Cost roof policy. If you have any questions feel free to reach out to us at PMI!
– Peder Wilkinson, Premier Mountain Insurance
