What does Actual Cash Value mean in Home Insurance?
Why Your Roof Coverage May Have Changed in Alabama and What Alabama Homeowners Should Know 🏠
From 2020 to 2024, insurance companies lost an estimated $35 billion writing homeowners insurance in the United States. These losses have led to noticeable changes in how policies are written and claims are paid- especially in states like Alabama where wind and hail damage is common.
And because the cost of home insurance has risen so much, home insurance companies are looking for ways to reduce coverage or limit claim payouts on some policies to lower the premiums. Check out our article on the Cost of Home Insurance in Alabama.
One of the biggest changes has been how roof claims are paid, and many homeowners may not realize their coverage has changed as their roof ages.
Why Roof Coverage Is Changing 🌧️
The cost to replace a roof doubled from 2015 to 2025 and roofs are now being replaced more often. Insurance data shows that roofs more than 10 years old are twice as likely to have a hail claim. Because of this higher risk, many insurance companies in Alabama now shift roof coverage to Actual Cash Value (ACV) once a roof reaches a certain age, often between 10 and 15 years.
This difference is important because Actual Cash Value can have a very different claim payout compared to Replacement Cost- see example below.
RCV vs ACV: What It Means
Replacement Cost Value (RCV) ✅
Your insurance pays the full cost to replace your roof, minus your deductible. This provides the highest level of protection.
Actual Cash Value (ACV) ⚠️
Your insurance will reimburse based on what your roof is worth today, aka the depreciated value, not what it would cost to replace it with a brand-new roof.
They look at several factors, including:
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The age of the roof. Often the insurance company will apply a formula that looks at the age of your roof compared to the expected age of a roof in Alabama- usually around 20 years.
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The material used
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The roof´s current condition (good, fair, or poor)
For example: If replacing your 20-year-old roof costs $17,000, but due to age and wear the value is determined to be $5,000, the insurer would reimburse you $5,000 minus your deductible.
Roof Schedules
Roof schedules are another way that insurance companies pay out on roof claims, but it isn’t as common in Alabama yet. A roof schedule is where the insurance company has a table in the policy that’s numbered or listed from Year 1 to Year 30 and beside each year it tells you what % the insurance company will pay you. (So maybe in Year 8 they will pay you 80% the cost to replace the roof)
Key points on ACV:
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It is up to the insurance company’s discretion (or the adjuster’s opinion) as to how they come up with the value of the roof.
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If your roof is in better condition, you might get a slightly better payout.
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If your roof is in poor condition, the payout could be very small.
Here’s a common example comparing how a claim payout can look with Replacement Cost vs Actual Cash Value can look:
What You Should Do Today 📝
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Check your policy
See whether your roof is covered as RCV or ACV. -
Review your deductibles
Many Alabama policies have separate wind or hail deductibles. Some are listed as a percentage instead of a dollar amount. Make sure you know how your deductible applies. (See our article on Deductibles in Alabama) -
Talk with an advisor
Insurance can be confusing, and it helps to have someone explain your options. The more informed you are before a claim, the better.
We Are Here to Help 🤝
At Allison Insurance, we are committed to helping Alabama homeowners understand their coverage and make the most educated decisions that protect their homes and families. Every homeowner is unique and we tailor your coverage to you.
If you are not sure how your roof is insured or think it may be time for a review, reach out. We will walk through your policy with you and help you feel confident about your coverage.
📞 Call, text or email us: 205-738-7444 or – reach out to an Allison Advisor today!
205-738-7444
