01/09/2025
First Snow Greetings!
Many of you are probably enjoying a warm cup of mulled wine right now. Meanwhile, I want to take a moment to share some personal insights. It’s truly heartbreaking to see someone holding a piece of paper with trembling hands, completely confused about what’s happening—wondering why they’re being charged so much without understanding the details.
Let’s talk about two key concepts that often catch homeowners off guard: “Deductible” and “Depreciation.”
Depreciation refers to the reduction in the value of your property over time due to wear and tear, or aging.
For instance, imagine your roof was installed in 2010 using standard materials rated to last 30 years under the manufacturer’s warranty (though this is often not realistic for Texas conditions). In such cases, an insurance company might withhold up to 50% of the roof's replacement cost until the roof is fully replaced.
What’s important to understand is that as your roof ages, your insurance provider may adjust your policy to an ACV (Actual Cash Value) basis. This means they’ll pay only the depreciated value of the roof, leaving you to cover the rest of the costs out of pocket.
Example:
In the screenshot below, the insurance company assessed repair costs at $14,579.14. However, after subtracting the Deductible and Non-Recoverable Depreciation, the final payout was reduced to just $6,136.25.
Deductible is the portion of the repair costs that the homeowner is responsible for paying out of pocket.
Before 2022, the deductible was typically 1% of the property’s total value. Today, it is increasingly common to see deductibles rise to 2% or higher. This directly reduces the amount paid by insurance for claims, making it essential to check what percentage your deductible is.
In some cases, the deductible can amount to nearly half of the total repair costs. An example of this will be attached below.
What Should We Remember?
Opinions on the U.S. insurance system may differ, but for most homeowners, it’s a necessary to safeguard. However, only you can take charge of your interests by carefully reviewing and understanding the terms of your insurance policy.
Wishing you all the best! Stay informed and protect your investments.