If your agent didn’t ask this question, you could be paying too much for too little.
I don’t like to gripe, but there is one thing about the insurance industry that bugs me. The bar to get in is not really very high. Yes, in order to talk coverage with a client, we must be licensed, but the test isn’t that hard, and you only have to score a 70%. This causes issues from time to time. One in particular is especially grievous because it can cost you more than you should pay AND cause you to be underinsured, which can cause you to pay even more if you have a claim!
I’m referring to the age of the roof on your house. An agent should never assume anything here. Roofs are replaced all the time for a wide range of reasons. This affects both the price of your policy and how your roof is covered.
Insurance companies do in fact have a different rating for every year of age on a home and also every year of age on a roof. Why the roof specifically? Simply put, the roof is one of the leading parts of a property that is damaged and covered by insurance year in and year out. Think about it. It’s essentially the shield of your home. It takes the most daily abuse from all sorts of things. Over time it wears out and as it wears out, becoming weaker, the roof becomes more vulnerable to damage and therefore your home is more vulnerable to resulting damage inside the home.
So, the older the roof, the higher the rate.
Now what about the coverage for the roof? Most insurance companies have switched to some form of depreciating coverage schedule. Allstate led the way with this around 2012 or 2013 and most other companies followed shortly after. Typically, it’s only applied to wind and hail damage. The way it works is that the roof is covered for a specific percentage of replacement cost that is reduced for every year of age. For example, a brand-new roof would be covered at 100%, a 1 year old roof would be covered at approximately 97%, a 2 year old roof would be covered at approximately 94% and so on. These may differ slightly from one company to another, but you get the idea. Most companies also offer an option to buy back full replacement cost coverage. But at a certain age, ranging from 10 years to 15 years, the coverage buyback is no longer available.
So lets say your roof is 16 years old, it’s still in good condition, so it hasn’t been replaced. Then a thunderstorm with very high straight-line winds comes through and tears off shingles all over the roof. Let’s use simple numbers and assume the cost to replace the roof comes out to $10,000. If the coverage is reduced by 3% every year, you’re only going to get 52% of the coverage or $5,200. But your deductible still hasn’t been applied. So, if your home is covered for $250,000 and you have a 1% deductible, that’s $2,500. Your insurance will pay you $2,700 and you cover the other $7,300. If it’s a 2% deductible, that’s $5,000. Your insurance will pay you $200 and you cover the other $9,800.
If you bought back the replacement cost coverage, you’ll only be responsible for the deductible and the insurance picks up the rest.
But what if your roof was replaced, your agent didn’t ask, and you didn’t know to mention it? Well, you’re paying more for less. In a worst-case scenario, you don’t know what you don’t know and you’re just left holding the bag. If you do appeal the coverage decision, you’re going to have to get the underwriters to update the coverage to allow the claim adjuster to correct the payments. That can be very difficult because you’ll be required to prove it. Pictures probably won’t fly. You’re going to have to have documentation. So at best, this will be a hassle and a delay. At worst, you may not be able to prove it.
It’s always best to get this right from the start. Your agent should ask. As long as the inspection process doesn’t throw up any red flags, you’ll have the right coverage at the right price.
The point is that your agent should ask, you should give as accurate an answer as possible and always keep documentation for things like this. If you bought it after an update was made, get documentation from the seller. Your price and your coverage will be correct and in the event of a damage claim, you’ll be glad you did.