The agents at Insurance For Texans are constantly speaking with home owners and the insurance companies that protect their largest asset. We field home insurance questions from many concerned parties on both sides of the equation as the real estate market has stayed white hot and the weather doesn't seem to be changing for the better when you consider our roofs.
One of the very first questions from North Texas homeowners is "what happens to my roof after a hail storm". These concerned Texans want to know how much their wind and hail deductible will be and if they can get the entire roof replaced on their Ft Worth home after that next big hail storm. Since hail is the number one home insurance claim type in Dallas-Fort Worth, we get it. So why is there all of the concern now?
History Of Roof Insurance Claims in Texas
A decade or two ago, when the big thunderstorms happened in Tarrant or Dallas County a homeowner knew that their home insurance policy was pretty straightforward in how the claim was handled with respect to hail damage. The insurance company would send an adjuster to evaluate the damage to the roofs of the homes in the metroplex, and then issue a check for the full replacement cost coverage amount that could be used to replace the damaged roofs. Homeowners and roofers found creative ways to abuse that method of claim settlement with full payments prior to work being completed which resulted in changes to the payment process, but the basic premise of the coverage settlement on the policies did not change.
As time moved on and claims made on policies due to hail damage racked up and the abuse of roofers not charging Grapevine homeowners deductibles during their claims forced the companies to increase deductible amounts, deny more claims, and change the way that they paid money out to those Texans seeking relief. In 2019 there was a bill passed by the Texas State Legislature that made it illegal for a roofer to forgo charging you the deductible on your claims. Even with these changes the losses have continued to accumulate as roofs have been damaged by the weather and premiums have continued to rise. So what, if anything can the insurance companies do to offset this spiral of premium and claim dollars?
Roof Payment Schedules
In a move to make policies more affordable for homeowners, the companies have begun to introduce new ways to settle claims made against roofs for Grapevine-Colleyville-Southlake residents. One recent phenomenon that Insurance For Texans has noticed is that of a Roof Payment Schedule or a Depreciation Schedule being placed on policies sold in North Texas particularly. What this means for you is that your roofs claim settlement is being changed from Replacement Cost Coverage to that of Actual Cash Value when you have damage to your home's roof. How does that work according to the coverage afforded on policies?
When an insurance policy is written on your home in The Metroplex, the coverage for roofs is determined to be either Replacement Cost or Actual Cash Value. There is no in-between. As the name implies, replacement cost coverage will fully replace your damaged roof when the adjuster determines that it meets the criteria for roofs needing to be replaced due to hail or windstorm. And since this was the de facto method of claim settlement for so long, most Texans assume that is what they are purchasing. The words actual cash value have a very negative connotation with Dallas and Fort Worth residents. But it works in the favor of the companies because it limits their payouts for roofs during those massive storms because you are not guaranteed a full replacement on your roof, but only the depreciated amount left in it's lifespan.
So in a move to contain costs, the companies decided that they would rename their actual cash value provision to something that sounds nicer. A Roof Payment Schedule.
How Do Roof Payment Schedules Work?
When the thunderstorms roll across North Texas dropping their hail on homes, the roofers, insurance agents, and adjusters go to work assessing damage and determining what homeowners need the assistance of the companies. This process is generally very smooth and checks are issued to cover the repairs to homes less the deductible amounts. When a roof payment schedule is included on your home policy, the way that they determine the amount of money that will be distributed to you changes compared to a traditional full replacement cost.
When a claim comes in, the first thing that is done is to determine the total amount of money required to replace your roof and other materials that are damaged. As mentioned above, that is the total amount that you would be owed by the insurer less the deductible amount in a full replacement cost situation. With a roof payment schedule, the insurer will subsequently lower the amount of money due to you by prorating down for each year that has occurred since your roof was replaced. That means as your roof ages, and becomes more susceptible to claim from a thunderstorm the company will pay the Texas homeowner less and less money. Ultimately, the roof replacements that are required by North Texas policyholders will increasingly not be covered by the homeowners policy but rather by your own pocketbook.
What's In A Roof Payment Schedule For Me?
The company entices you to take this option with a reduced premium to be paid on a homeowners policy for each year that the policy is in force. With skyrocketing premiums over the last few years, this is an attractive option for many Tarrant and Dallas County residents. However, that reduced cost comes at a steep price when the claim comes. Why don't we use math to see who wins here.
The savings, which can range from five percent to as much as 25% on an annual basis, do not make a lot of sense for a North Texas homeowner. The average home premium for a $250,000 home in Dallas-Fort Worth that was built five to fifteen years ago is going to range from $1,700 to $2,200 for that traditional roof coverage that we all expect. So your savings will range from as little as $100 up to $550 if your house is a bit older.
When, not if, the storms come and your roof receives enough hail strikes to need repair you will see that reduction in the payout for your roof that increases as it's life span increases. For a five year old roof, the reduction would be in the 10% to 20% range and could be as large as 75% if your roof has not been replaced in over 15 years.
That means your $16,000 claim for replacement of your roof would be adjusted as follows:
- $2,500 for your 1% deductible
- Anywhere from $1,600 to $12,000 for your schedule
That check from the insurer just went from being $13,500 to as little as $1,500 if your home is older. Is that really worth the $200 annual savings on your policy?
Do I Have To Take A Roof Payment Schedule?
You ABSOLUTELY do not have to take a roof payment schedule on your Texas home policy. TRUE Texas Home Insurance guarantees that we will not offer you a roof payment schedule!
While many of the call centers and direct to consumer are pushing folks down this path, it is absolutely not required today. Insurance For Texans works with many home insurance companies that still offer a traditional replacement policy along with a 1% wind and hail deductible. Those policies will not be the cheapest one available, but they will help both you and us to sleep well knowing that the next big storm system that rolls through doesn't bankrupt you when it comes time to look at your roof. Contact us today to find the RIGHT policy for you and your home.
Ron Wadley is an owner and General Solver of Problems for Insurance For Texans. Ron is a resident of North-East Tarrant County in the Dallas-Ft Worth area. He loves riding his many bikes and watching his Baylor Bears play football and basketball. Send him your insurance questions at firstname.lastname@example.org.