- If you know the roof needs repair or replacement, you may leave ACV on the policy. The policy will process through the system as normal.
- If you choose to decline ACV, please select NO. Selecting NO will remove the ACV endorsement and refer the policy to underwriting for review. Underwriting will approve the removal of ACV, however, recent photos are still required on the property.
Q: What is an example of the payment or settlement process when the ACV roof endorsement is applied?
A: When claims adjusters inspect a roof, they evaluate the condition of the roof as well as its age. If the roof is in good condition for its age, there may be little to no adjustment. For example, we would not apply depreciation to a six-month-old roof. However, if the roof is in poor condition, or if inadequate repairs have been made, the adjuster will apply a yearly depreciation percentage. The depreciation is applied on the materials only and not on the labor. Please see the following example:
- Replacement Cost 25-year roof, 5 years old when damaged: $9,350.00.
- Materials Cost: $5,000.00 – 5% deprecation for every year = 5x5 = 25%
- Non-Recoverable Depreciation of the materials: $1,250.00 – we will not pay this amount after repairs are complete because the member does not have replacement cost coverage.
- ACV Payment - $8,100
- Deductible: $1,000
- Final Payment: $7,100
Q: What is the claims process for investigating a member’s roof claim?
A: When we receive a new claim involving damage to a member’s roof, the claims specialist will complete the following investigation: inspect the roof for damages, determine the age of the roof, take photos, and write an estimate for repair or replacement barring no other policy exclusions apply. The initial payment for all roof damages of $2500 or more is subject to actual cash value less deductible payment until the repair is complete.
“Actual cash value” (ACV) is the amount it would take to replace the property minus a deduction for depreciation due to age and normal wear.
Depreciation is the amount by which the value of a home or personal property has decreased in value since the owner bought it. Depreciation is caused by a combination of age (how long ago something was purchased), and condition (the amount of wear and tear or other damage.) Depreciation is not the same as real estate value. A home and land may appreciate in value, but materials depreciate. Calculating depreciation based on age is straightforward. For example, if a roof is supposed to last 20 years and it is 5 years old when damaged. The roof depreciates in value 5% for every year, or 25% in this case.
Q: How are disputes handled regarding the scope of damages and/or cost to repair or replace? Will you notify members and agents? Is there a protocol to dispute your findings?
A: Our property claims specialist will explain the settlement to the member at the time of inspection. The member will also receive a settlement letter explaining the payment. If the member disputes the scope of damage and/or estimate, we will review the case with their contractor of choice. If we maintain our original position, we will advise the member and the agent verbally and in writing explaining the arbitration option within the HO and DP policy contract. The arbitration process involves a neutral mediator who reviews the scope and estimate to repair or replace from Northern Neck Insurance and the member’s contractor. The member incurs any cost of having their experts appear at the hearing.
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