Overview

Insurance policies may pay for roof damage using different settlement methods depending on the policy terms and the age of the roof. Two common methods are Roof Payment Schedule (RPS) and Actual Cash Value (ACV).

Understanding how each system works is important because it directly impacts how much the insurance company will pay and whether additional funds can be recovered later.

1. Roof Payment Schedule (RPS)

Definition:

A Roof Payment Schedule (RPS) is a policy provision that limits how much the insurance company will pay for roof replacement based on the age of the roof.

Instead of paying the full replacement cost, the insurance company applies a predetermined percentage from a payment schedule that decreases as the roof gets older.

The percentage applies to all roof surface components and installation, including:

• Materials

• Labor

• Overhead and profit

• Taxes and fees

• Associated roof surface components

This percentage determines the maximum amount the insurance company will pay, regardless of the actual replacement cost.

Insurance companies use a payment chart based on roof age. As the roof ages, the percentage paid decreases.

see example file from insurance 

Example Scenario:

• Replacement cost: $20,000

• Roof age: 15 years

• RPS payment percentage: 55%- 85% (depending of material type)

Key Characteristics of RPS

1. Based on roof age
The payment is determined by the roof’s age at the time of loss.

2. Non-recoverable reduction
Unlike depreciation in some policies, the reduced portion cannot be recovered after repairs are completed.

3. Applies to roof surface components
RPS provisions typically apply to:

• Shingles

• Underlayment

• Roof accessories

• Roof labor

• Overhead and profit related to roofing

Other trades (siding, gutters, interior, etc.) may still be paid differently depending on the policy.

2. Actual Cash Value (ACV)

Definition

Actual Cash Value (ACV) is the value of damaged property after depreciation is applied.

Depreciation reflects the reduction in value due to:

• Age

• Wear and tear

• Condition

• Useful life

ACV represents what the item is worth at the time of loss, not the cost to replace it with new materials.

ACV Formula

ACV is typically calculated using the following formula:

Replacement Cost Value (RCV) – Depreciation = Actual Cash Value (ACV)

Example:

• Replacement cost (RCV): $20,000

• Depreciation: $8,000

ACV Payment:

$20,000 – $8,000 = $12,000

Recoverable vs Non-Recoverable Depreciation

Recoverable Depreciation

In some policies, depreciation may be recoverable after repairs are completed and documentation is submitted to the insurance company.

Non-Recoverable Depreciation

In ACV-only policies, depreciation cannot be recovered, even after the work is completed. The insurance company will only pay the depreciated value.

3. Key Differences Between RPS and ACV

4. Why This Matters in the Supplementing Process

Understanding the policy settlement type helps determine:

• What amount insurance is expected to pay

• Whether additional funds can be recovered

• How to communicate expectations with our clients

For example:

RPS Claim

• Payment is capped by the policy schedule.

• Even if the scope increases, the final payment will still be limited by the RPS percentage.

ACV Claim

• Increasing the replacement cost may slightly increase the ACV payment, but depreciation may still significantly reduce the payout.

5. Internal Process: Next Steps When Identifying RPS or ACV Claims

When reviewing a new claim, follow the steps below:

1. Identify the Claim Type

Begin by confirming the claim structure. Determine whether the claim is:

• Roof Payment Schedule (RPS)

• Actual Cash Value (ACV) only

• Replacement Cost Value (RCV)

This information is typically found in:

• The estimate summary

• Policy language

• Depreciation breakdown

(Refer to the example of an RPS estimate for guidance.)

2. Evaluate Whether Supplementing Makes Sense

As a general practice:

• We do not typically supplement RPS or ACV-only claims, since the payout is significantly limited by the policy structure.

• Increasing the estimate often does not result in a meaningful increase in final payment.

➡️ Before taking any action, review the claim with Vlad.

3. Advise the Client

If the claim is identified as RPS or ACV:

Clearly explain to the contractor that:

• The insurance policy caps or reduces the payout based on depreciation or a payment schedule.

• Even if additional items are approved, the final settlement amount may not increase significantly.

• The homeowner may not receive full replacement cost coverage.

The goal is to ensure the client clearly understands the financial limitations of the claim before moving forward.

4. Proceed Only if the Client Chooses to Move Forward

If the contractor still wants to proceed:

• Confirm expectations and ensure alignment on the likely outcome

Ask internally:

“Is there a clear path to getting paid for this work?”

Because RPS and ACV claims often yield minimal additional funds, it’s critical to determine whether the time and effort required to supplement the claim is justified.

5. Billing & Internal Notification

If work proceeds on an RPS or ACV claim:

• Reach out to Vlad prior to billing

• Confirm how the claim is being handled and billed internally