When your insurance company has fully accepted your roofing claim after a storm or other damage, understanding the payment process is crucial. Here’s a step-by-step guide that explains what happens once your claim is accepted, so you can navigate this process smoothly, with confidence.
1. Claim Acceptance & Initial Payment (ACV minus Deductible)
Once your insurance company approves the claim, the first payment you will receive is called the Actual Cash Value (ACV). This payment represents the value of your roof at the time of loss, considering depreciation due to age and wear.
However, before you receive this payment, your deductible will be subtracted. Think of your deductible like a copay for health insurance—it’s the amount you are responsible for, required to unlock the insurance payout. For example:
Roof Replacement Cost: $10,000
Depreciation (due to age): $3,000
Deductible: $1,000
Initial Payment (ACV minus deductible): $6,000
You will need to pay the deductible directly to your contractor, and the initial ACV payment will be used to order materials and schedule the project.
2. Starting the Work
Once the initial payment (ACV minus deductible) is received by you, it will be handed over to the contractor to begin the job. This is a crucial step because the funds are necessary to purchase materials and set a date for the work to commence.
3. Completion of the Job & Documentation (COC)
When the job is completed, your contractor will document the work thoroughly. They will submit a Certificate of Completion (COC) along with photos and other requested documentation (such as permits or additional inspection reports) to the insurance company. This documentation certifies that the work has been done as outlined in the insurance claim.
4. Releasing the Second Payment: Depreciation & Paid-When-Incurred (PWI) Items
Once the insurance company verifies that the job is complete, they will release the second payment. This payment will include:
Depreciation Payment: Remember that depreciation was withheld in the first check. Once the roof is completed, the insurance company will release the amount they had previously held back for depreciation. In our earlier example, that would be $3,000.
Paid-When-Incurred (PWI) Items: Sometimes, the insurance claim includes optional upgrades or code-required items (such as an upgrade to code-compliant materials). These are only paid after they are completed and properly documented. For instance, if your insurance scope included an optional upgrade for impact-resistant shingles, you will need to provide proof that this was installed to receive the PWI payment.
5. Final Payment: Supplementation (If Required)
In some cases, a third and final payment may be necessary due to supplementation. This occurs when additional work is needed beyond what was initially included in the insurance claim. For example, during the roof replacement, the contractor may discover damaged decking (the wood beneath the shingles), which wasn’t part of the original estimate.
When this happens, the contractor will document the issue and submit it to the insurance company for approval. Once approved, the insurance will cover this additional cost as part of the overall project. Importantly, this extra payment is not the responsibility of the homeowner—it is covered by insurance with proper documentation and approval.
Example of Supplementation:
Original Claim: Roof replacement for $10,000
Additional cost for damaged decking: $1,200
Supplementation approved: $1,200
Final total: $11,200
6. Payment Process and Responsibilities
All payments made by the insurance company will go directly to you, the policyholder. As the homeowner, it’s your responsibility to transfer these funds to your contractor in a timely manner to avoid delays or complications.
Failing to pay the contractor could cause problems, including potential legal issues. Additionally, not using the insurance funds for the intended work can be considered insurance fraud, which can lead to significant legal risks for both you and your contractor.
Key Takeaways
Deductible: This is your portion of the cost (like a copay) and must be paid.
ACV Payment: The initial payment that covers the depreciated value of your roof, minus the deductible.
Depreciation & PWI Payment: The second payment is released after the work is done, covering the held-back depreciation and any optional or required upgrades.
Supplementation: Any additional work discovered during the project may result in an additional payment from insurance, with proper documentation.
To make sure your roofing project goes smoothly and matches your insurance agreement, it's important to understand how the insurance payment process works. Ruffin Roofing is dedicated to helping you understand each step and will keep you updated on the progress.
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