That’s not a clickbait title, I’m serious. I’m too old to
We all put things off from time to time. Some of us are
disciplined enough to jump right on a task, but even those people sometimes
need to do some research.
Some of us tend to procrastinate, but don’t have time today,
so they’ll procrastinate tomorrow.
Most of us just have real life stuff happening, and anything
that isn’t an immediate crisis might have to wait. Work, kids, activities, etc,
it all takes up our time, and it’s perfectly natural that we put some things
off until we feel like we have some time for it.
However, that can cost you. Big time.
I don’t mean that you can lose money when a tree falls on
your house during a hurricane and you just LET the rain pour in for the next 6
months. Or that your septic tank can back up and you just “won’t have time” to
handle it. Those types of issues have what Harrison Ford and Tom Clancy call a
“Clear and Present Danger” to your home. I still love that movie.
I mean that if you need to file an insurance claim for
something, even a seemingly small something, you need to do it NOW, or you are
risking thousands of dollars. What do I mean? Here, I’ll show you.
<<Insert Image Here>>
This notice was sent to one of our customers by their
insurance company. Now, we removed all of the personal information for obvious
reasons, but here’s basically what it says. “Hey, if you file a claim for wind
or hail damage to your roof, we are supposed to pay for the damages in 2
checks, but we aren’t going to send you the second one because we are greedy
and don’t care about our customers.”
Some of you are thinking “yeah, big businesses are always
doing that,” and some of you are thinking “what the heck does that mean?” One
of you doesn’t even believe me, but that one thinks the Earth is flat. So for
the sake of you who are wondering, and the one flat-Earther, let’s break this
Many kinds of insurance pay in different stages. Most home
insurance won’t pay 100% of a claim up front anymore, since 2008. Instead, they
pay parts at different times. Some up front, some after some paperwork, some at
the end, etc.
The total amount required to restore your property when you
file a claim is typically referred to as the Replacement Cost Value (RCV). You
might see that on an insurance estimate or your policy. That’s the whole claim
total for everything. You might also see the phrase Actual Cash Value (ACV),
which means the value of the undamaged old thing that you are filing a claim
on. For example, your old, faded patio furniture isn’t worth the price of new
patio furniture. So, when you file a claim, you might get a statement for the
RCV up front, along with a check for only the ACV. When you replace/fix the
damage, you should then get a check for the rest of the RCV, not including your
deductible. This difference between the ACV and RCV is called “Depreciation.”
Exciting stuff, right?? If you need to grab a Red Bull, I
won’t be offended.
Right about now, you’re asking yourself “why is this piece
of writing taking so long to make a point?” The answer is that you have to
understand a couple of basic concepts about insurance before this all makes
sense. Sure, I could ask you to Google each of these terms, but then you’d find
a video of a dog, and this would all be over. Did you see the one where the dog
was getting on the counter to eat the chicken nuggets? Hilarious!
So, you file a claim, you get a check for the ACV, you hire
contractor to do the work, and then you get the check for the rest of the
Yeah, that’s the whole point of this. Insurance companies
don’t want to pay you ANY money, so they worked up this “ACV Only” bit that
they add on to a policy. It’s usually part of an “endorsement” or something
that sounds good.
In truth, you just never get that second check. You don’t
actually get the money that they would normally pay you…or that another
insurance company would pay you.
“Ok,” you’re thinking “but it isn’t that much, right?”
Want a real life example?
A house in Cobb County, Georgia, with Liberty Mutual
insurance, with only ACV coverage for their roof, got an estimate from their
insurance company for $13,450 for their roof replacement. They have a $1,500
deductible. Their payment from insurance?
That’s a lot of “surprise” money to cough up for the average
American family, especially since the deductible has *nothing* to do with how
your ACV is calculated. This family expected to pay the deductible, but the
rest was a surprise.
Do you think they started shopping for a new policy? Would
it surprise you?
By the way, most mortgage companies require their customers
to have homeowner’s insurance…RCV coverage homeowner’s insurance. That’s why
the insurance companies make these “riders” or exceptions; they can’t make the
whole policy like that.
The above notice came along with a “time to renew”
notification that was sent to our customer, and it was triggered because the
roof will soon be reaching an age that they don’t like. Insurance companies
that do this typically won’t do this with a brand new roof, but starting as
early as 10 years old, you could see this happen. That is why waiting until
“something happens” can really put you in a bad spot.
So, take a moment sometime soon, on “bill pay day,” or
“checkbook balancing day,” (if people still do that) and take a look at your
insurance policy. Call your agent and ask questions.
As contractors, we cannot tell you who to buy insurance
from, or endorse one particular company. However, we see things like this
*every day,* where our friends, family, and customers get this kind of
treatment from their insurance company. Take a few moments, familiarize
yourself with your policy, and make the right decision for your home and
P.S. Wouldn’t it be so much worse if your insurance company
not only stuck you with ACV coverage, but didn’t even pay for the items that
you need for your claim? Click here for more information.