Do I have to pay a deductible for hail damage to my roof?
Do I have to pay a deductible for hail damage to my roof? This is one of the most common questions we are asked and the simple answer is yes, you must pay your insurance deductible, or you could be committing insurance fraud. In the recent past, this was overlooked by many contractors willing to bend the rules and work in the gray area just to be able to compete with all the storm chasing roofers. Because of this, Texas passed HB2102 which made it a punishable offense to not pay your deductible. We will discuss how this could be considered fraud and other commonly asked questions about deductibles. Let’s get started.
Why is not paying your deductible insurance fraud?
To understand how not paying your deductible could become insurance fraud, you must first have a good understating of these four definitions from your insurance claim.
What is an RCV and an ACV?
Replacement Cost Value (RCV) – this is the cost that the insurance determines is needed for the work to be completed.
Depreciation – the amount withheld from the RCV based on a depreciation timetable; depreciation can be recoverable or nonrecoverable depending on your policy. Recoverable depreciation is paid by the insurance company once all the work has been completed.
Actual Cash Value (ACV)– the amount the insurance will pay. It is determined by taking the RCV minus the depreciation. (Note- This does not take into consideration the amount you pay for your deductible.)
Deductible – This is the amount you, the insured, must pay. This is a predetermined amount when you buy your policy which is typically 1 or 2 percent of the insured value.
So, let’s look at an example of a roof claim to see how all these terms relate.
Pretend we have a roof replacement with an RCV of $10,000, a depreciation of $2000 and an ACV of $8000 with a deductible of $1000. This means the cost of a new roof should be $10,000 but you will receive a check for only $7000 since your deductible is $1000 (RCV – Depreciation = ACV; ACV – Deductible = First Payment) In the past, the roofer would waive the deductible but turn in an invoice for $10,000 to recover the depreciation, therefore, defrauding the insurance company.
How do I recover the depreciation?
To receive the payment for the recoverable depreciation, all the work must first be completed, and an invoice must be sent to the insurance company showing all depreciated items have been completed and billed at the full RCV. If any item is not done for the full RCV amount, then you will only receive a percentage of the depreciation for that item. For this reason, most roofers will just complete all the work for the RCV amount giving by the insurance and then supplement for any damages they did not originally cover.
How is it fraud?
Insurance fraud is committed if you or the contractor sends an invoice for the full RCV in order to collect the whole depreciation payment but the insured did not pay the full deductible. It can also be fraud if not all the work on the invoice was fully completed. Total payments from the insured must equal the total invoiced by the contractor.
“The last time the roofer covered my deductible”
We often hear “the last time the roofer covered my deductible” and while that may be true it was never truly legal. Many legit roofing companies were forced to follow suit of all the flight-by-night roofers that all come running when a storm hits an area. Many of these shady roofing contractors perform poor quality work and do not honor warranties. Even worse, some of these were crooks that just took the first check and never performed any work. They could lure their victims in with the promise of waiving the deductible saving the customer a few thousand dollars. Many other roofing contractors were forced to offer similar deals if they wanted to be able to compete in the same market.
Is it Illegal for a Roofer to Pay your Deductible?
Starting Septemeber 1st, 2019 it bill HB2102 became law which made it illegal for a contractor to waive the insured’s deductible or offer any incentive to cover any portion of the deductible amount. Credits, rebates or any assistance to keep the insured from paying the full deductible would be a violation of the law. This new law basically made it impossible for the insured to not pay their deductible.
What if I can’t afford to pay my deductible?
Often people do not have the extra money to pay an expensive deductible but still need the roof replaced to prevent further damage. In these cases, Baker Roofing & Construction offers financing through Hearth. You can get financing to cover your deductible and any other work you might want to have performed while we are already at your home.
If a person does not pay their deductible then they will not receive the full depreciation monies and that means only partial repairs could be performed. Additionally, if you choose to not do any of the work and pocket the first payment, then in the event of more damage you will be partially or fully liable for the costs of the damages.
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