Recently, the Texas Commissioner of Insurance issued general remarks and official action outlining state law requiring a clear, conspicuous notice at least 30 days in advance when an insurance company offers a renewal policy that reduces coverage. Insurers who do not place these notices conspicuously are subject to administrative penalty fees.

We know that a Replacement Cost Value (RCV) policy is considered to be better than an Actual Cash Value (ACV) policy because, even though the premiums may be higher, 100% of the roof is covered. What you may not know is that your RCV policy could one day change into an ACV policy. When this change occurs, it is your insurer’s responsibility to notify you promptly. If they don’t, they could face administrative penalties.

It is good practice to routinely check your insurance policy once it is annually renewed. The Chad T. Wilson Law Firm recommends this because there is a chance your RCV policy changed to an ACV without your knowledge or consent. Although it is the insurer’s responsibility to notify you when the policy changes to an ACV, sometimes they forget to notify you.

Keep in mind that there may be endorsements on your ACV policy. A twenty-year-old roof has more wear and tear than a new one. The granules have diminished over time. You wouldn’t insure an old car the same way you would a brand-new Maserati. Simply stated, RCVs aren’t typically written for old roofs.

The Texas Commissioner of Insurance has been straightforward with the requirements. For your insurance company to be compliant with modifying your RCV policy to an ACV, your insurer must:

• Provide you a notice in writing 30 days before the policy changes.
• Language must be in bold and clearly, conspicuously placed in the notice.
• Your signature must be on the notice.

Texas Insurance Code 551.1055

Section 551.1055 of the Texas Insurance Code prohibits an insurer from using an endorsement or policy provision that makes a material change to a covered policy, unless the insurer provides the insured timely written notice with an explanation of the change that is conspicuously placed and clearly indicates every material change in the policy, written in plain language.

For example, changing a deductible by $50 is not a material change. Adding an appliance coverage to your overall homeowners insurance policy is not a material change.

Examples of a material change are:

• Reduction in coverage.
• Changes in coverage conditions (RCV to an ACV).
• Changes in the duties of the insured.

Insurance companies don’t want to pay for old roofs because paying for old roofs cuts into an insurance company’s profits, and losing profits is why they deny insurance claims in the first place. If your property insurance claim has been denied, delayed, or underpaid, call the Chad T. Wilson law firm today at (832) 415-1432 and get your case reviewed for free by an expert property litigation attorney.

Not only is roof damage stressful to manage, but you will need to file an insurance claim to get it repaired or replaced. Before going to your insurance company, you will want to know what perils are covered and what limits you have on your homeowners insurance policy. When purchasing an insurance policy and filing claims, you should be aware of the distinction between replacement cost and actual cash value.

What is replacement cost value and actual cash value? 

Replacement Cost Value (RCV) policies will pay the price to repair or replace your damaged property without deducting for depreciation. An Actual Cash Value (ACV) policy will pay the depreciated price to repair or replace your damaged property. Insurance companies typically determine depreciation based on the condition of the property when it was damaged, what a new roof or damaged item would cost, and how long it would endure the elements.  For example, imagine we have two families, the Millers, and the Jones. Each household has the same amount of damage to their roof. Both families have a $1500 deductible. The deductible is what you have to pay out of pocket.

The Millers’ policy is an RCV, which means when the roof is replaced, they will be reimbursed the full cost of the roof repair, subtracting their deductible. The Jones’ policy is an ACV, which translates to them only getting paid for the current value of the roof repairs, subtracting depreciation and the deductible. Which family would you rather be?

Each policy type covers your roof damage, but an RCV policy delivers more financial protection than an ACV policy.

How Does the Type of Insurance Affect My Claim?

Homeowners insurance can cover damages from windstorms and hail, but some policies exclude these types of coverage. This is fairly typical in coastal or high-risk areas. Purchasing a separate wind and hail policy might be in your best interest in these potentially hazardous areas.

Another good bit of advice is to ask your insurance company if your wind and hail policies have separate deductibles. Some policies have unique deductibles that apply to specific parts of your dwelling, like your roof.

Now that you know the differences between insurance policies and why your insurance policy needs additional protections. It’s important to review your homeowners insurance policy before filing a claim. That way you know what to expect when speaking with your insurance company.

Keep in mind, insurance companies deny insurance claims frequently.

Sometimes insurance claims get denied for legitimate reasons, while other times the denial is a mistake or worse. It could be a filing error, a misunderstanding of your policy terms, or a novice claims adjuster that didn’t understand your policy.

If you feel your insurance claim was unjustly denied, file an appeal with your insurer. If this appeal fails and you believe your case has been grossly mishandled, your next step should be to contact the Chad T. Wilson law firm.

Expert Property Insurance Attorneys

We understand living with roof damage and a denied or underpaid property insurance claim can be a difficult, stressful time. Our attorneys will aggressively pursue your insurance company for every dollar you are due. Get your case review for free and call (832) 415-1432 and speak with an expert property insurance attorney today!