What Landlords Need to Know About Roof Insurance
Most landlords underestimate the impact their property's roof has on landlord insurance. A well-maintained roof can lower your insurance premiums and give you lower deductible options. A poorly maintained roof, on the other hand, that may need costly repairs in the future will have you shelling out more in terms of insurance premiums with higher deductible options.
Here we will look at:
- The importance of having a well-maintained roof
- How the quality of your roof affects the cost of your roof insurance
- What roof insurance covers and the cost of some major claims
- And finally, what you can do to extend the life of your roof and reduce your roof insurance
Why is roof maintenance important?
Roof-related damages from wind and hail are one of the largest drivers of losses not only for property owners but also for insurance companies. The Insurance Information Institute (III) pegs this number at 45.5% of property damages between 2016 and 2020. The losses themselves came to $11,695 per claim on average.
While the findings of III's study highlight why landowners have to include roof insurance in their policies, the study also speaks volumes about why it's crucial for landlords to maintain their roofs to save on premiums and deductibles.
A roof is the first line of defense against harsh weather.
It's a literal barrier between everything you care about inside the house and the outside world. This also means that it takes the most beatings during windstorms, hailstorms, hurricanes, and similar events.
As if that weren't difficult enough, a roof also has to deal with falling debris, temperature extremes, and prevent potential water damage from heavy rain or snow. Damage from water and hail can be severe. Some compromise the structural integrity of the roof and lead to costly repairs or replacement.
A well-maintained roof has a better chance of withstanding storms, hail, rain, and whatever Mother Nature throws at it. Less damage means fewer repairs. And having fewer repairs is always a plus.
Roofs don't last forever.
You can, however, extend their life with regular maintenance.
Some landowners treat roof maintenance as an afterthought. Roofs typically don't even feature in annual maintenance lists alongside other items, like HVAC units and countertops, for instance. This is an error, considering that the life expectancy of most roofs is on par with most appliances you would typically find in homes.
First comes the normal wear and tear. As your roof ages, it's going to struggle to keep the water out of your property.The material on top of the shingles will eventually fall off and wash away, giving water plenty of gaps and cracks to seep through. Even if the damage isn't immediately noticeable, it can weaken the structure and lead to leaks in the future.
Then there is the climate. How long your roof can survive also depends on the climate conditions in your region. If your property is in a climate with multiple seasons, you can expect your roof to expand and contract throughout the year. This continuous expansion and contraction will cause your roof to deteriorate faster.
Not all roof-related repairs get insurance coverage.
Many landowner insurance policies won't compensate you if your home springs a leak and leaves a stain on the ceiling without any obvious external cause. They need visible exterior damage to the roof to even consider your roof damage claim.
For example, if you neglect to maintain the flashing around your chimney, the flashing will deteriorate over time. This can result in internal damage caused by leaks. But because there would be no sudden external damage, your insurance provider may deny your claim.
While regular roof maintenance can help circumvent some problems, keeping your roof in need of less maintenance from the get-go is also possible. When landlords add roof insurance to their landlord insurance, the first thing many insurance companies look at is the condition of the roof.
How does the condition of the roof impact the cost of landlord insurance?
Insurance companies pay special attention to the roof when pricing and underwriting policies for landlords. Sometimes, the condition of the roof is priced into your initial quote. In other cases, they inspect the roof after issuing a policy and ask for information about its age, material, and condition. They will then adjust the premium or the coverage based on the roof's state.
Next, they will explicitly state in their policy how they will settle insurance claims for roof damages. They can offer you coverage in one of the following three ways:
- Full Coverage
- Actual Cash Value
- No coverage
Insurance providers offer replacement cost coverage for roofs—some also call this full coverage.e This coverage can be provided by a specific endorsement or within the base policy.
To receive full coverage under roof insurance:
- The roof must be well-maintained and in good condition. The newer it is, the better.
- You conduct regular maintenance.
- Your roof is made of materials that can withstand harsh weather conditions (asphalt shingles, metals, or tiles).
- It’s properly installed and ventilated to prevent accelerated deterioration.
- Some companies also consider whether or not your roof adheres to building codes and other regulations in your region.
However, if your roof is in poor condition such as missing shingles, your insurer can move to Actual Cash Value coverage calculation going forward. All this will also be explicitly stated in the policy. So make sure to read the fine print of your policy thoroughly to avoid any surprises in the future.
Actual Cash Value
When insurance companies inspect a roof, they consider three things:
- How old (or new) the roof is
- The average lifespan of that type of roof
- And how well-maintained the roof is
Based on the results of their inspection, they will determine the expected rate of depreciation for your roof. So, the Actual Cash Value, or ACV, is the depreciated value of the roof at the time of filing a roof damage or repair claim.
Let’s say the cost of your roof is $20,000 at the time of taking out the roof insurance. The insurance company applied $1,000 per year as the rate of depreciation. If you claim replacement costs 10 years after taking out the policy, the insurance company will pay you:
$20,000 (cost of the roof) – $10,000 (No. of years x depreciation) = $10,000 (minus any deductible)
Note that each insurance company calculates Actual Cash Value differently.
If your policy has full coverage, you will receive the total cost of the replacement value from the insurers, minus your deductible. So the better maintained your roof is, the better financial outcome for you.
If your roof is in very poor condition, sometimes your insurance company will choose not to insure your roof at all. They will exclude coverage for it entirely. This will be clearly stated on your policy and you may even be required to sign documentation for this to be applied.
Estimated costs of roof damage claims
Here are some estimated roof repair costs compiled by Forbes Home:
- Asphalt shingle roof repairs cost about $2,200 on average.
- Clay or concrete repairs will set you back about $1,000.
- Metal roof repairs cost $1,220 on average.
- The average repair cost for wood shingles is $750
- Roof and hail damage repairs tend to cost between $600 and $1,250 per roof. However, this will vary depending on the roofing material used.
- If you go down the route of professional damage inspection, be prepared to shell out up to $200 for a physical inspection and $550 for an aerial drone inspection.
- A complete roof replacement cost for average-sized homes is about $11,500.
So when you set out to buy a new property, it's a good idea to take a long and hard look at the roof.
What to look for in a roof
Here are three quick pointers on what you should look for:
The right roofing material
Insurance companies love metal roofs because they are resistant to fire and can last up to 70 years, depending on the climate. Durable tile roofs are also an excellent roofing material and offer many of the same benefits as metal roofs. Asphalt shingles are an excellent and affordable option but age faster than their metal and tile counterparts. It is important to note that there are more expensive asphalt shingle options that match the durability and longevity of metal and durable tile roofs.
Avoid wooden and aluminum roofs. Several insurance companies don’t cover wooden roofs, as they catch fire easily. Those that do will ask you to treat your wooden roof with a fire-retardant coating. Aluminum metal roofs also tend to have a lot of issues. They get damaged easily and are hard to repair.
The current state of the roof
The most obvious thing you’re looking for is that shingles are missing from the roof. You’ll see them lying on top of the roof, or visually, you will see gaps where the shingles are missing. Asphalt shingles have roofing granules on the top. If several granules are missing and you can see the fiberglass underneath, it means the roof is either old or needs repairs.
Also keep an eye out for multiple-colored shingles. If you see them, it means the roof has been repaired at least once. You will also want to ask for receipts or a job order copy of any prior repairs. This will help you lower your roof insurance costs.
If you find the roof with marks as if it had been hit with a bunch of paintballs, that's a sign of hail damage and will need repairs. So factor these repair costs into the purchase price before you sign the dotted line.
A sloping roof or a flat roof
You need to be extra thorough with flat roofs. The lack of slope in a roof's design can lead to drainage issues. Even the roof's edges and flashing can show signs of damage or deterioration, as these areas are particularly vulnerable to leaks. A sloping roof is generally better but a well drained flat roof is just fine
How to extend the life of your roof?
Affordable roof insurance starts with taking good care of your roof. The following tips will help you keep your roof in excellent condition:
- Perform regular roof inspections. Look for signs of damage or wear, like missing or broken shingles, cracks, and leaks. Repair any issues as soon as possible to prevent further deterioration.
- Clean your gutters and downspouts at least twice a year to prevent water buildup and ice dams that can damage your roof.
- Remove anything that lands on your roof. Fallen objects and debris may reduce the lifespan of your roof.
- Avoid walking on your roof unless necessary. This can cause cracks, dents, or holes in your roof.
The condition of your roof has a direct bearing not only on your insurance costs but also on the type of coverage you will receive in case of a claim. A well-maintained roof can lower your risk of damage and increase your chances of getting a full replacement. A poorly maintained roof will raise your risk of damage and limit your coverage to its actual cash value.
This is why, as a landlord, you must take preventive measures to maintain the roofs of your properties and keep them in excellent shape. If you are unsure of the condition of a roof, it is always a great idea to contact a credible local roofer to conduct an inspection.
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