Raise the Roof!
(And It’s Deductible)
Higher costs involved in replacing roofs and increased weather events could affect your rates.
By Darrick Hummel
Changes in the home insurance market are impacting how roofs are treated in insurance policies, which homeowners may discover when they renew their insurance or make a claim.
These shifts started forming during the Covid pandemic’s height when people suddenly worked from home for months and invested in additions and significant upgrades.
They added space for home offices, in-law apartments, pools, and more. Then, when the pandemic subsided, and interest rates went up, more homeowners decided to remodel rather than move and see their mortgage payment interest double.
Labor costs have risen dramatically, resulting in increased repair or reconstruction costs following a loss. Additionally, the increased frequency and severity of weather events are, in turn, causing increased claim frequency under homeowners’ policies, putting additional pressure on material and labor availability. These factors all result in materially higher average costs for homeowner’s claims. Everything simply costs more than it did 5 years ago.
While it’s taken some time for the insurance industry to catch up to these trends, we now see how cost increases influence home insurance rates. When it costs more to fix storm-struck roofs or replace them, insurance companies will adjust their coverage to account for the increased costs. We’re now in a situation where the home insurance market is reacting, and roofs are getting a great deal of attention because of their impact on the integrity of a home.
Homeowners needing to file a claim amid all these issues are more likely to see higher repair bills for roofs and significantly larger spending to rebuild a home after a catastrophe.
TREND: PAY ATTENTION TO THE AGE OF YOUR ROOF
As insurers consider the price pressures they face—higher inflation, higher rebuilding costs, and changing weather patterns that affect their modeling—homeowners could see modest increases in their home insurance because of the age of their roof and the materials it’s made of. Metal, for example, is considered to have a longer lifespan than asphalt shingles.
Unfortunately, some homeowners delay the repairs and ongoing maintenance needs of their roof (an important feature of all homes that is mostly out of sight out of mind). Insurers know that a 5-year-old roof will hold up much better than a 25-year-old roof during high winds and storm activity and could factor this into their rate.
Previously, insurance carriers considered fire the leading cause of loss, but 10 to 15 years ago, wind and hail damage surpassed the peril of fire and is driving up claims costs. Once a roof turns a certain age, some carriers may not provide replacement coverage for it, but rather the actual cash value, which means they’ll depreciate the claim based on the age of the roof. In such cases, the homeowner will have to pay more out-of-pocket than they would have in the past.
The situation will vary among carriers, but it’s possible for a 15-year-old roof, or older, to have depreciation applied on materials and labor in replacing the roof.
TREND: COSMETIC EXCLUSIONS
Another development we’re seeing from carriers is cosmetic exclusions. For instance, a hailstorm may cause dings to a metal roof that is only cosmetic and does not compromise the roof’s integrity. In that case, a claim may be turned down.
TREND: HIGHER DEDUCTIBLES FOR WIND AND HAIL
Coastal areas have had higher wind and hail deductibles for years. Hurricane-prone areas see a set percentage deductible based on the dwelling coverage limit. These deductibles can be as much as 3–4 times higher than the standard flat deductible. This is less likely to occur in our area, but we expect this trend to make its way here over time as problematic weather events increase in value and impact.
TREND: SHIFTING DEDUCTIBLE
Another possibility that carriers could require is increasing the wind/hail deductible as the age of your roof progresses. Let’s say your roof is 8 years old, and your deductible is 0.5% of the dwelling limit. The carriers could consider doubling that to 1%, as a strategy to adjust for inflation over time. Currently, each carrier may be addressing coverage for aging roofs differently.
PREPARING FOR HIGHER COSTS OF ROOF REPAIR, BUILDING
My best advice is to notify your insurance agent about any remodeling additions you have recently made and any new outbuildings you have added to your property. If you recently replaced your roof, contact your agent so they can update your policy. It may qualify for a discount on your home premium and better coverage at claim time.
TREND: REPORTING PERIODS
Try to prioritize roof maintenance. Check the condition of your roof after storm activity. Some insurance carriers have implemented reporting periods This means if you discover damage to your home and the storm occurred over 12 months ago, the claim could be denied if it was not reported soon enough.
How much shelf life does your roof still have, and can it get through another winter? This is a must-ask question at least once a year. If you are unsure, you may want to have an expert look at it.
Also, consider looking into a higher deductible and bundling policies to try to maximize value. Work with your agent to review the optional endorsements on your policy. Set up automatic withdrawals on your policy if you haven’t already—a late payment could affect your insurance rates during renewal time.
Lastly, keep in mind: Higher incidents of unusual and impactful weather events make it necessary for property owners to think about their roof after a storm. If it’s not safe or feasible to check it yourself, see about getting someone who can.
