Pro-tip when selecting insurance on properties

[Tj Henderson]

I've recently started working as a roofing contractor here in Kansas City, an area that sees hail & wind storms quite a bit, and it's made me realize a few things. First, the midwest gets hit with damage causing storms almost constantly. With that being said, too many people don't know what they're really getting when they're getting their insurance.

I don't want to go into a ton of details but I wanted to share a couple of the things I've noticed that I think are super important.

1 - Full replacement cost value coverage - this is where I see the most landlords go wrong. In an area like Kansas City, where there are countless hail/wind storms, full replacement cost value coverage is a must. Yes, it's going to increase your expenses and lower your cash flow but if you're knowledgable about the insurance process, having full RCV coverage is going to significantly reduce your capital expenditures. When insurance is paying a claim out, there are two values given. The RCV is what the insurance is estimating the cost should be to replace the entire roof. The second value is called the Actual Cash Value(ACV). That's what the roof is valued at when you depreciate the value based on its age. 

This means that if your insurance says your roof should take $15,000 to replace & your roof is 15 years old, rated for 30 years, the insurance will give you $7500 (minus your deductible). If you have the RCV policy, you'd be getting the full $15,000 (Minus the deductible).

The second thing I see homeowners go wrong is with their deductibles. Many companies are switching to a percentage deductible. This 1-2% deductible is based on the value of your home. This leads to homeowners having outrageous deductibles; the most recent ridiculous deductible I came across was $6080! The roof was $18,000 to replace, so the homeowner still saved money, but if they had a flat rate deductible they would've saved much more. 

When picking a deductible, I personally recommend choosing a deductible in the $1-2000 range. Some companies are trying to get away from the flat rate deductibles for storm damage but from what I can tell, most are still offering it. 

Finally, find a local contractor who specializes in working insurance claims. If they're good at it, they'll know what to look for in storm damage to get insurance to pay on everything that's damaged, not just the roof. Don't work with companies who say they'll waive your deductible; this is insurance fraud and if they're waiving deductibles, they're going to be cutting corners to make up that cost. An experienced contractor will be able to help you maximize what insurance will pay for - doing this I helped a homeowner recently get a brand new roof installed, paid nothing out of pocket and kept $1500 due to damage to his back porch, shed & gutters.