Most Colorado homeowners know they have a deductible on their homeowner's insurance. What surprises many of them is just how large that deductible can be when it comes specifically to hail and wind damage, and how much that number affects whether filing a claim makes financial sense. Before you call your insurance company after the next storm, here is what you need to understand about how deductibles work in Colorado.
Flat Dollar Deductibles Versus Percentage Deductibles
There are two types of deductibles you will encounter on a homeowner's policy. A flat dollar deductible is a fixed amount, most commonly $500, $1,000, or $2,500, that you pay out of pocket before insurance covers the rest. These are straightforward. A percentage deductible works differently. Instead of a fixed amount, you pay a percentage of your home's insured value. For example, a 1 percent deductible on a home insured for $400,000 means your deductible is $4,000. A 2 percent deductible on that same home is $8,000.
Why Colorado Has Percentage Deductibles
Over the past 15 years, as hailstorm frequency and severity along the Front Range increased dramatically, insurance companies began losing money on Colorado residential policies. Their response was to shift hail and wind specific deductibles to percentage based amounts, which transfers significantly more financial risk to the homeowner. Today, many Colorado policies have a standard flat deductible for most claims but a separate, higher percentage deductible specifically for hail and wind damage. If your policy has a 1 or 2 percent wind and hail deductible and you own a $500,000 home, your effective deductible for a storm damage claim is $5,000 to $10,000. Many homeowners do not fully understand this until they are sitting across from an adjuster.
How to Find Your Actual Deductible
Pull out your homeowner's policy declarations page. Look for sections labeled wind, hail, or named storm deductibles. They are often listed separately from your standard all perils deductible. If you cannot locate the information or the language is confusing, call your insurance agent and ask them directly: what is my deductible specifically for hail and wind damage? Get the answer in writing. Knowing this number before a storm occurs allows you to make a clear financial decision when one does.
ACV Versus RCV Policies
Beyond the deductible, the type of coverage you have determines how much money you actually receive. An RCV policy, which stands for replacement cost value, pays you the full cost to replace your roof with new materials at current prices minus your deductible. An ACV policy, which stands for actual cash value, pays you the depreciated value of your damaged roof, meaning the adjuster assigns an age and condition value to your roof and subtracts the depreciation before paying. On a 12 year old roof, the depreciation deduction under an ACV policy can be enormous, sometimes leaving you with a settlement check that covers less than half the actual replacement cost.
Recoverable Depreciation Explained
Many RCV policies issue the initial payment as ACV, withholding the depreciation portion until the work is actually completed. This withheld amount is called recoverable depreciation. Once you complete the repairs or replacement and submit documentation to your insurer, they release the recoverable depreciation. This means your total payout equals full replacement cost. However, you need to understand this two step process and know to ask for the recoverable depreciation after the work is done. Many homeowners miss this step and unknowingly leave money on the table.
When Does Filing a Claim Actually Make Financial Sense?
This is the question every homeowner should ask before filing. A general rule of thumb is that your damage estimate should be at least two to three times your deductible before filing makes sense. Filing for a claim that pays out less than your deductible is pointless, and even filing for a small amount above your deductible may not be worth the potential rate increase on your policy. If your roof has sustained widespread hail damage, the repair or replacement cost is typically well above most deductibles, and filing clearly makes sense. If you had a few shingles blow off in a wind event and the repair estimate is $1,500 with a $3,000 deductible, you should pay out of pocket and not file. insurance restoration support
What to Ask Your Insurance Agent Before Storm Season
Every spring before hail season begins is a good time to review your policy. Ask your agent the following questions. What is my specific hail and wind deductible? Do I have an ACV or RCV policy? If I have an RCV policy, does it include recoverable depreciation and how do I claim it? Has my coverage changed since I last reviewed it? Are there any exclusions I should know about for older roofs? Has my premium increased and if so, are there discounts available for impact resistant shingles?
The Impact Resistant Shingle Discount
Many Colorado insurers offer a premium discount of 20 to 30 percent for homes with Class 4 impact resistant shingles. If you are replacing your roof anyway, installing Class 4 shingles can generate enough annual savings on your premium to partially offset the higher material cost over the life of the roof. See our hail damage insurance guide for more detail on how hail damage and insurance interact, and talk to your agent about what discount applies to your specific policy.
At Gates Enterprises, we work with insurance companies on the Front Range every single day. We understand how to document damage thoroughly, how to work with adjusters, and how to make sure homeowners receive what they are entitled to under their policies. If you have questions about a recent storm, call us at (720) 766-3377 for a free inspection and an honest conversation about your options.