When an insurance company in Florida covers the roof of a home at actual cash value (ACV), the compensation for damages may be insufficient to install a new one.
The reason is that this method accounts for the accumulated depreciation of the roof, unlike the replacement cost coverage (RCV).
The distinction gained importance in 2026, after the Federal Housing Finance Agency (FHFA) announced in March that Fannie Mae and Freddie Mac would accept insurance with Actual Cash Value coverage for roofs on homes and condominiums, subject to their respective mortgage requirements.
The B7-3-02 guide from Fannie Mae, updated in August 2026, states that roofs must be insured, but not necessarily at replacement cost.
This allows certain policies to use the depreciated value to calculate compensation for roof damage.
What does each type of coverage pay?
With RCV (Replacement Cost Value) coverage, the insurer can cover the reasonable cost of repairing or replacing the roof with similar materials, without deducting for depreciation.
The payment is subject to the deductible, limits, exclusions, and other conditions of the policy.
In certain RCV policies, the company initially pays the depreciated value and delivers the difference when the homeowner completes and documents the repairs within the established deadlines.
With ACV (Actual Cash Value) coverage, the compensation takes into account the depreciation of the roof. According to the Florida Office of the Insurance Consumer Advocate, this option calculates the payment by deducting the loss of value of the property, while RCV coverage uses the current replacement cost as a reference.
The difference can be significant when the roof is several years old, even if the damage is covered by insurance.
How is the depreciation of the roof calculated?
To determine depreciation, insurers may consider the age of the roof, its condition, the materials used, its estimated useful life, and the assessment method outlined in the policy.
A hypothetical example helps to understand the economic effect. Let’s assume that replacing a roof costs 22,000 dollars, it is 12 years old, and it has an expected lifespan of 30 years.
If a straight-line depreciation method is used exclusively for this example, the roof would have consumed 40% of its useful life.
The depreciation would be $8,800, and its depreciated value would be $13,200.
With an ACV coverage and an applicable deductible of 2,000 dollars, the insurance company would pay approximately 11,200 dollars. The homeowner would need to contribute the remaining 10,800 dollars to replace the roof with one costing 22,000 dollars.
If the owner had RCV coverage that allowed for full recovery of that depreciation, they could receive an additional $8,800 after meeting the repair and documentation requirements. Their final expense would be $2,000, corresponding to the deductible.
These amounts are illustrative. Real depreciation is not always calculated linearly, and the payment depends on the policy, damage assessment, and coverage limits.
The hurricane deductible and the specific roof deductible
In Florida, homeowners' policies may include a hurricane deductible that is separate from the standard deductible.
It is generally calculated as a percentage of the insured limit of the home, known as Coverage A, and is usually 2%, 5%, or 10%, although there are other options and legal exceptions.
For example, with a Coverage A of $300,000 and a hurricane deductible of 2%, the corresponding amount would be $6,000. This amount is not calculated based on the cost to repair the roof, but rather on the insured limit of the home.
When the hurricane deductible applies, another deductible cannot be applied simultaneously to the same loss. Under certain conditions, the hurricane deductible accumulates over the calendar year, according to Florida regulations.
State legislation also allows for a specific deductible for roofs of up to the lesser of these two amounts: 2% of the Coverage A limit or 50% of the cost to replace the roof.
This specific deductible is an option that the owner should be able to reject through the established procedure. The insurer must offer a discount or credit on the premium when this option is selected.
However, the specific ceiling deductible does not apply to damages caused by hurricanes, covered total losses, certain damages that penetrate the roof structure, or repairs affecting less than 50% of its surface. When it does apply, it cannot be combined with other deductibles from the same policy for that claim.
These state requirements must be distinguished from mortgage conditions.
The Fannie Mae guide for one to four unit properties establishes a maximum deductible of 5% of the insurance coverage amount for the required risks.
If there are separate deductibles for certain risks, each must adhere to that limit.
What changed in 2026 for Fannie Mae and Freddie Mac?
The FHFA announced in March 2026 changes to the insurance requirements accepted by Fannie Mae and Freddie Mac, with the stated goal of reducing costs and expanding coverage options for homeowners and buyers.
Among the changes is the acceptance of ACV coverage for roofs, without requiring that this part of the home be insured at replacement cost. The measure also applies to certain condominium building insurance policies.
This does not mean that all parts of the property can be insured at depreciated value. Replacement cost coverage remains required for other components of the property according to the applicable guidelines.
In the case of Fannie Mae, the requirements for one to four unit housing are outlined in guide B7-3-02. Master property insurance for condominiums and other developments is governed by specific provisions for those properties.
Freddie Mac also incorporated changes to accept ACV coverage on roofs, but its conditions should be consulted in its own guidelines. Mortgages from other investors or programs may have different requirements.
What should the owner check before choosing an ACV policy?
An ACV coverage can allow for a more affordable premium, but it may also leave the homeowner with significant costs if they need to replace the roof after a loss.
Before hiring or renewing a policy, it is advisable to check whether the roof is covered at ACV or RCV value, how depreciation is calculated, what deductibles apply, what the exclusions are, and whether there are conditions for recovering retained amounts after the repair.
It is also important to confirm that the coverage meets the requirements of the mortgage lender, especially when the loan is associated with Fannie Mae, Freddie Mac, or another program with specific guidelines.
The Florida Office of the Insurance Consumer Advocate recommends comparing the terms of the policies and consulting with the agent or insurer before choosing a coverage option.
The decisive difference is not just in how much the insurance costs each year, but in how much money the homeowner would need to contribute to repair or replace their roof after a covered loss.
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