How is roof depreciation calculated?

Insurers usually base it on the roof's condition at the time of loss, the cost of a new one and how long it would normally last. In Texas, TWIA's simplified example uses 25% for a 5-year-old roof with a 20-year expected life.

What is the difference between an ACV and an RCV payment?

On an ACV policy, depreciation is deducted and the rest, less the deductible, is the payment. On an RCV policy, the ACV is paid first and the recoverable depreciation after repairs are completed.

When is recoverable depreciation paid?

CP 00 10 will not pay on a replacement cost basis until the property is actually repaired or replaced, as soon as reasonably possible after the loss. In Texas, when repairs cost more than the first payment, TWIA says documentation must be submitted within 545 days of receiving the initial claim payment.

What is a roof surface payment schedule?

An endorsement table that gives a percentage of the roof's replacement cost by roof age and material. In HO 88 02 01 14 it is one of the amounts compared, with the least paid, for windstorm or hail damage to the roofing system.

Actual cash value and roof depreciation calculator

Actual cash value (ACV) is commonly figured as the cost to repair or replace damaged property minus depreciation. Replacement cost is the cost to replace it with materials of like kind and quality, with nothing taken off for depreciation. On a replacement cost policy, the depreciation held back from the first payment is paid later, once repairs are done. This calculator splits a roof claim into those parts.

Your roof and policy

Cost to repair or replaceDeductibleRoof age (years)Expected life (years)Or the share a roof payment schedule pays (%, optional)The policy pays

Result

Depreciation: $5,000
First payment: $11,000
Paid after repairs: $5,000
Total: $16,000

Estimate from the numbers you enter. General information, not insurance, legal or financial advice. Your policy's wording decides what is paid.

How the math works

Depreciation is the loss in value over time, usually from age, wear and tear or obsolescence.

Depreciation: cost to repair or replace x the depreciation percentage. By age, the calculator uses roof age / expected life. In Texas, TWIA's simplified example applies 25% to a 5-year-old roof with a 20-year expected life, the same as 5 / 20.¹
Depreciation from a roof payment schedule: the schedule gives a percentage for the roof's age and material, applied to the cost of replacing the roofing system. The calculator counts the rest, cost x (100% minus the schedule percentage), as depreciation.²
First payment: cost minus depreciation minus deductible, never less than $0. In Texas, TWIA says there is no payment when the cost is less than the deductible.¹
Recoverable depreciation: on a replacement cost policy, the depreciation is paid after repairs or replacement are completed. On an actual cash value policy it stays deducted. TWIA's policies in Texas work this way.¹
Total: first payment plus any recoverable depreciation.¹

Insurers usually base depreciation on the property's condition at the time of loss, the cost of a new one and how long it would normally last. Cost minus depreciation is the most common way to figure ACV; fair market value and the broad evidence rule are the others.

Example

In Texas, TWIA publishes this example claim calculation: $200,000 of coverage, a 2% deductible ($4,000), $20,000 of covered roof damage and 25% depreciation for a 5-year-old roof with a 20-year expected life.¹

TWIA example claim calculation¹
	Replacement cost policy	Actual cash value policy
Cost to repair or replace	$20,000	$20,000
Depreciation (25%)	$5,000	$5,000
Deductible	$4,000	$4,000
First payment	$11,000	$11,000
Paid after proof of repairs	$5,000	None
Total	$16,000	$11,000

The $20,000 roof loss in TWIA's replacement cost example¹

First payment$11,000
Deductible$4,000
Recoverable depreciation, paid after repairs$5,000
Total$20,000

Where the numbers come from

Cost to repair or replace: the estimate for the covered roof damage, the first line of the claim calculation.
Deductible: the declarations page.
Replacement cost or actual cash value: CP 00 10 values property at actual cash value unless the declarations show its Replacement Cost optional coverage.³
Schedule percentage: the roof payment schedule endorsement, read by roof age and roofing material.
In Texas, TWIA lists the deductible under "Per Item/Per Unit Deductible" and provides replacement cost by endorsement TWIA-164 on commercial policies and TWIA-802 on dwelling policies.¹

Questions

How is roof depreciation calculated?: Insurers usually base it on the roof's condition at the time of loss, the cost of a new one and how long it would normally last. In Texas, TWIA's simplified example uses 25% for a 5-year-old roof with a 20-year expected life.^4,1
What is the difference between an ACV and an RCV payment?: On an ACV policy, depreciation is deducted and the rest, less the deductible, is the payment. On an RCV policy, the ACV is paid first and the recoverable depreciation after repairs are completed.
When is recoverable depreciation paid?: CP 00 10 will not pay on a replacement cost basis until the property is actually repaired or replaced, as soon as reasonably possible after the loss. In Texas, when repairs cost more than the first payment, TWIA says documentation must be submitted within 545 days of receiving the initial claim payment.^3,1
What is a roof surface payment schedule?: An endorsement table that gives a percentage of the roof's replacement cost by roof age and material. In HO 88 02 01 14 it is one of the amounts compared, with the least paid, for windstorm or hail damage to the roofing system.²

Terms used here

Aerial view of a flat commercial roof with rooftop units

Cloudbreak

Cloudbreak keeps a dated record of every roof section, elevation and rooftop unit before a storm, in photos, drone video and notes, with original files and timestamps intact.

Get Protected Pre-loss documentation How it works

Sources

The tool does arithmetic only and sends nothing anywhere. The rules it follows are from the published sources below.

1. Texas Windstorm Insurance Association: Factors that Affect the Claim Payment Amount
2. Nevada Division of Insurance: Roof Surface Payment Schedule, HO 88 02 01 14 (American Family specimen form)
3. Insurance Services Office (copy hosted by Independent Insurance Agents of Texas): Building and Personal Property Coverage Form, CP 00 10 10 12
4. National Association of Insurance Commissioners: Rebuilding After a Storm: Know the Difference Between Replacement Cost and Actual Cash Value When It Comes to Your Roof (July 22, 2021)

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