ACV vs Replacement Cost Roof Coverage in Alabama
The single most expensive mistake Alabama homeowners make: choosing Actual Cash Value roof coverage to save $200/year, then discovering they're $15,000 short when filing a hail claim. Here's the real math with Alabama claim examples.
The Short Answer
Replacement Cost (RC) pays to replace your roof with new materials at today's prices. Actual Cash Value (ACV) pays replacement cost minus depreciation—typically 60-80% less for roofs over 10 years old.
For a 15-year-old roof damaged by hail, RC coverage pays ~$15,500 after your deductible. ACV coverage pays ~$2,900. You're personally responsible for the $12,600 difference.
In Alabama's high-wind, high-hail climate, we recommend Replacement Cost coverage for all roofs under 20 years old.
Side-by-Side Comparison
How It Works
Pays to replace your roof with new materials at today's labor and material costs. No depreciation deduction.
Real Alabama Claim Example
Pros
- Full replacement at today's prices
- No out-of-pocket gap (beyond deductible)
- Roofers accept RC claims immediately
- Repairs happen quickly (no secondary damage)
Cons
- Costs $150-300/year more than ACV
Typical annual cost difference: +$200/year
Over 10 years, you pay $2,000 more for RC coverage. But a single claim saves you $10,000-15,000 out-of-pocket.
How It Works
Pays replacement cost minus depreciation. For roofs, depreciation is typically 5% per year (70% depreciation for a 15-year-old roof).
Same Alabama Claim Example
You're $15,100 short of the actual replacement cost.
Pros
- Lower annual premium ($150-300/year less)
Cons
- Massive out-of-pocket gap ($10k-15k typical)
- Most homeowners can't afford the gap
- Roofers often refuse ACV claims
- Delayed repairs lead to secondary damage
- Secondary damage often denied (failure to mitigate)
Typical annual savings: $200/year
You save $2,000 over 10 years. But a single claim costs you $10,000-15,000 out-of-pocket—wiping out 50-75 years of "savings."
Why Alabama Roofers Refuse ACV Claims
We've seen this scenario dozens of times: Alabama homeowner files a hail claim, gets approved, then discovers no roofer will take the job because the ACV payout is too low.
Homeowner with a 12-year-old roof filed a hail claim after the April 2024 Cullman hailstorm. Insurance approved the claim and issued a check for $4,200 (ACV payout after deductible).
Replacement cost: $16,500. The homeowner needed to come up with $12,300 out-of-pocket.
Five roofing contractors refused the job. They won't work with homeowners who can't afford the gap—too many payment disputes and abandoned projects.
The homeowner delayed repairs for 8 months. During that time, water leaked into the attic, causing $6,000 in additional damage. The insurance company denied the water damage claim, citing "failure to mitigate further damage."
Total out-of-pocket: $18,300 ($12,300 roof gap + $6,000 denied water damage)
The ACV Death Spiral
- Hail damages your roof → claim approved
- ACV payout is 60-80% less than replacement cost
- You can't afford the $10k-15k gap
- Roofers refuse the job (or demand payment upfront)
- Repairs delayed → water leaks → secondary damage
- Insurance denies secondary damage (failure to mitigate)
- You're stuck with a damaged roof and additional water damage
When ACV Roof Coverage Might Make Sense
We're not saying ACV is always wrong. There are specific situations where it's appropriate:
- Roof is 20+ years old and you're planning to replace it soon anyway
- You have $15k+ liquid savings to cover the gap if needed
- Rental property where you're optimizing cash flow
- Vacation home with minimal wind/hail exposure
- Primary residence where you can't afford a $10k-15k surprise expense
- Roof under 15 years old (high depreciation on newer roofs)
- Alabama tornado/hail zones (North AL, Jefferson County)
- Tight budget where you're choosing ACV just to save $200/year