Understanding Homeowner’s Insurance: Replacement Cost Value, Actual Cash Value, Roof Payment Schedules and Deceptive Practices

When purchasing a homeowner’s insurance policy, it’s critical to understand how different types of coverage affect what you’ll receive when you file a claim. Many policyholders assume they’ll be made whole after a loss, only to be blindsided by fine print that significantly reduces their payout.

Three common ways insurance companies calculate payouts for property damage are Replacement Cost Value (RCV), Actual Cash Value (ACV), and Roof Payment Schedules (RPS). Each method has significant implications for homeowners, particularly as insurance companies continue shifting more financial burden onto policyholders. It is also important to read and understand all riders and endorsements as some insurers are sneaking in devious changes. Here’s what you need to know.

Replacement Cost Value (RCV)

RCV is the most comprehensive type of coverage. It reimburses homeowners for the full cost of replacing or repairing damaged property without factoring in depreciation. If a covered peril (such as a wind or hailstorm) destroys your roof, then your insurance company should pay the amount needed to restore it to its previous condition—minus your deductible.

WARNING: Some insurers are quietly attaching Roof Payment Schedules (RPS) as endorsements or riders to RCV policies, effectively reducing the amount they pay out for roof damage. This deceptive practice allows insurers to advertise full RCV coverage while implementing payout limitations based on roof age.

Actual Cash Value (ACV)

ACV coverage reimburses homeowners for the current value of the damaged property after depreciation is deducted. For example, if your 10-year-old roof sustains storm damage, the insurance company will only pay what the roof is worth today, not what it would cost to replace it. Given that roofs, appliances, and home structures lose value over time, ACV often leaves homeowners with substantial out-of-pocket expenses.

Insurance companies increasingly push ACV policies because they lower the insurer’s liability while still allowing them to collect high premiums. Homeowners often don’t realize the difference until they file a claim and discover they’re receiving pennies on the dollar for major damage.

Roof Payment Schedule (RPS): A New Way to Pay Less

One of the most deceptive ways insurance companies are shortchanging policyholders is through Roof Payment Schedules (RPS). RPS policies have different names depending on which insurance carrier you use. Examples include Scheduled Roof Settlement, Roof Surfacing Payment Schedule, Limited Loss Settlement for Windstorm or Hail Losses to Roof Surfacing, etc.

With RPS clauses insurers assign a predetermined percentage payout based on the roof’s age.

For example:

• A brand-new roof might be covered at 100%.
• A 5-year-old roof might be covered at 80%.
• A 15-year-old roof might be covered at only 30%.

This means if a storm destroys your 15-year-old roof, you’ll be on the hook for 70% of the replacement cost—on top of your deductible. Many homeowners discover this only after filing a claim, as insurers bury these details deep in policy documents.

Worse, even if you have an RCV policy, your insurer may have slipped an RPS endorsement into your policy, drastically reducing your expected payout. In effect, many RCV polices are being converted to ACV policies without the homeowner’s understanding.

The Rise of Percentage-Based Deductibles and Other Deceitful Endorsements

Another tactic insurers are using to shift costs onto homeowners is the rise of percentage-based deductibles. Rather than a flat deductible (e.g., $1,000 per claim), insurers are increasingly implementing deductibles based on a percentage of your home’s insured value.

For example, if your home is insured for $400,000 and you have a 2% deductible, you’ll be responsible for $8,000 before your insurance coverage kicks in.

Furthermore, some insurance companies have added “Roof Damage Limitation Endorsements” that exclude all coverage from the repair or replacement of decking. In other words, the insurer only covers the outermost layer of roof material even if new decking is required by law, ordinance, building code or manufacture warranties. This means that the you could be required to pay thousands of dollars out of your own pocket for items you assumed would be covered by insurance.

Unfortunately, many homeowners only realize how much they’re on the hook for after a disaster strikes.

How Insurance Companies Are Rigging the Game

In addition to percentage-based deductibles, RPS and other shady endorsements, some insurance companies are increasing premiums, denying claims and pushing cosmetic damage exclusions.  Insurers justify these practices by pointing to rising claim costs, inflation, and increasing weather-related damages. While some of these concerns are valid, the real motivation is profit.

Tragically, homeowners are left to foot the bill for repairs, forcing many to take out loans or delay necessary fixes, which can lead to even worse damage over time. Additionally, the lack of transparency makes it difficult for policyholders to understand what they’re paying for until it’s too late.

What Homeowners Can Do

• Read the Fine Print: Before renewing your policy, carefully review your coverage to see if ACV, RPS, percentage-based deductibles, roof damage limitation endorsements, or cosmetic damage exclusions have been added.
• Request RCV Coverage Without RPS: If possible, opt for Replacement Cost Value policies that do not include Roof Payment Schedule riders or endorsements.
• Compare Insurers: Shop around and ask about payout structures and endorsements before committing to a provider.
• Upgrade to a More Durable and Longer-Lasting Roof: Choose to replace your roof with Stone Coated Steel, Metal Panels or Composite/Polymer products. Or, if you decide to go with asphalt shingles, consider Class 4 Impact-Resistant shingles. On the bright side, some insurers offer discounts when premium products are installed because they know that the chances of future claims diminish when long-lasting products are installed. Even though the initial cost of  beautiful and rugged roofing materials is higher than standard asphalt shingles, you could actually save money after taking into account the frequency of replacements, energy savings, decreased insurance premiums, and the insurance shenanigans discussed in this article.

Final Thoughts

At Roofing Force, we make it easy for you to recover from storm damage and upgrade to a better roof. Give us a call and we will help you with the insurance claims process. We’ll also help you choose the best roofing material for your needs and budget. We are expert installers of all roofing products in Kansas, Missouri, Illinois, Oklahoma, and Arkansas. You can count on us to get the job done correctly. Visit our Material Comparison page for more information or give our main office a call at (913) 270-5440 and we will set a free inspection for you.