When a person files a storm claim (wind or hail), if insurance buys it, they will write an estimate for the damage to be repaired. This total amount of the damaged property is called the RCV or “Replacement Cost Value”. That is what the property (mainly the roof in our case) is worth in brand new condition.
They then subtract the client’s deductible (which is paid by the customer to their contractor) as well as the Depreciation (which is determined by age of the property). The remaining amount is called the ACV or “Actual Cost Value”. This is the amount of the first check insurance will write.
In most cases, insurance will miss certain items…the contractor will submit any supplements (item’s not originally paid for by insurance) to be paid for. The supplement may be a check by itself, or it may be included on the depreciation check.
Once the work is complete, the contractor will submit to the insurance company a final invoice of all the work that was done and request that the depreciation be released. The final invoice should match the amount that insurance has agreed to pay. Insurance will then release the recoverable depreciation.
** If the policy has non-recoverable depreciation, that amount would be payable by the client, assuming they have agreed to perform the work prescribed…it is not paid by insurance. Usually non-recoverable depreciation, will be on items like fencing, decking, etc. but sometimes a carrier will write a policy that carries non-recoverable depreciation on the roof, or other high ticket items, in exchange for a lower premium from the client. Clients should be aware of this situation, and come to any agreement that needs to be made, before any work is performed **