Roof Insurance Money & How It Works: The Perfect Way To Explain It To Homeowners

You are about to learn a very powerful lesson for brand new salespeople or seasoned pros on how to understand this insurance process and how this insurance money works to be able to communicate it really clearly to a homeowner so you can stand apart from them and win more business. So think of this as a two part video. Part one is an education and ground up understanding. And then part two is how to use this understanding as a sales tool. Because, hey, everything on this channel is designed to help you develop personal sales strategy strategies to smash your income goal. Hey, my name is Adam the roof strategist. And welcome if you're new here, if you're not welcome back. In a future video, I'll be breaking down these complicated insurance loss summaries or scopes of loss and making sense of what means what again, to help you communicate and close more deals. But for this video, let's jump right into how I explain this process so you can understand and experience it as I would explain it to a homeowner. Now, before I jump into a little whiteboard session here, I'm going to be doing the analogy, the story about the homeowner's car. Now, why do I use analogies? I use analogies because we often get too in the weeds and too detail oriented on this terminology when it comes to the insurance process or someone's home or roof. And I want to break it into very simple stories that they're going to understand. And darn near every homeowner that you serve has a car or a truck. So let's make it about that. Ready? Let's jump in. So, Mr. Homeowner, let's pretend that you're driving a 2015 Ford F150 pickup truck. And it was a top of the line truck and when you bought it, it was $50,000. By the way, I'm using all rough numbers for easy math here. Okay, so now it is now 2020, the time of this filming, almost 2021. So the vehicle's five years old. Now, let's say something bad happens, unfortunately. Don't worry, everyone's going to be okay. But the car gets totaled, someone crashes into it while it's parked and this gets smashed. So now the vehicle is done. Well, the insurance company, they're going to do what? They're going to cover it because you're insured, Right? But are they going to write you a check for 50,000? Nah, they're not. Because the vehicle is five years old, it's got a bunch of miles on it. So the insurance Company owes for like kind. Like kind and quality. Okay. Which I'm going to show you how this comes into play here in a minute. Now, to replace that vehicle, they're not going to get paid at 50. They're going to pay what it's worth today. And what might that vehicle be worth today it is going to be worth, for this conversation, 25. Okay, so to get a truck with a 2015 F, 150 low miles, platinum, whatever it is, it's 25 grand. But the insurance company isn't going to write the check for 25,000 because there's a deductible that's owed. Right? So what is the deductible? The deductible is the contractual agreement between the homeowner and the insurance company. And it's the same no matter if it's a $2,000 loss or 2 million dollar loss. Now, I know there are some new deductibles coming up, which is a percentage of the claim or a percentage of the home value, even, right? So 2% of the value of the house. But generally speaking, that contractual agreement, that's going to be a fixed cost. So we're going to subtract it from this number. So what is this number here? This is what's called the actual cash value, meaning what it is actually worth today. This is a 2015 F150. That was 50 grand, but it's not actually worth that much now. It's worth 25,000. So you'll notice that actual cash value has three letters, ACV. This is an important thing to learn. ACV is some insurance language that you're going to see come back later. And this is what the roof is worth today, the actual cash value. Now, I'm about to switch stories here in a second, but they're deductible. For easy math, let's just say is $1,000. So that homeowner, when they got their insurance policy, said, I am committed to covering my contractually obligated portion of the claim so I can get this thing done. It's a thousand bucks. Boom. So there we go. The homeowner then receives a check for $24,000. This is the first payment. Okay, so quick recap. What the vehicle was worth, we're going to pay if it gets total later, the actual cash value, or ACV, what it's worth now, then we're going to subtract the deductible, and that's our first check. Now, how does this relate to the roof? Let's jump on to the other side, let's say that their roof for this conversation was $20,000 brand new. That's the cost to replace the roof. Replacement cost value, which you'll notice just like ACV has an initial of rcv, so this homeowners roof, the same one who's driving this fictitious car has a $20,000 roof. That's what it's going to cost to replace. But here's the thing, that roof is now 15 years old. It was expected to last 30 years. So it's half of its lifespan has been used up. That is meaning the initial payment for the homeowner is going to be just like the vehicle. Not what it's worth, sticker price new, but what it is worth today is the actual cash value. And because it's 15 years old, that's about half the lifespan. And you'll see this come up on these scopes of loss, the amount of depreciation which they'll either do in a percentage or a number of years. So if this was a 30 year roof and it's 15 years old, then it's worth $10,000 which is the actual cash value or ACV similar to the used vehicle. And again, the homeowner's amount might be their deductible. Okay, deductible. And for just for apples to apples comparison, we're going to call this a $1,000 deductible, which means that the homeowner will receive a $9,000 first payment. Make sense? All right. Now one quick thing to know when it comes to roofing, generally speaking on insurance claims, and I know there are some exclusions here and there, but some policies are going to only cover the actual cash value, meaning the homeowner is kind of screwed because they got to come up with the extra 10 grand. It's a very rare thing, but you got to watch out for it. You got to ask, okay, generally speaking, they have a full replacement cost value coverage, meaning the entire roof will get paid for. But then this begs the question of the homeowner says, Well I have $9,000 only right now, how do I get the rest? And it's simple. This is where it's a little different than car sales. Excuse me, car claims. Because homeowners who might have gone through this process, what might they be thinking? I have $24,000. So what do they want to do? They want to go shop for a 2015 F150 in better shape, but they're going to try to find it out for 24,000 they're going to try to find it for like 20 grand and pocket the difference, right? Ahaha. That's in car claims. But it doesn't work that way when it comes to their home. The reason for that is simple and I'm going to explain it right now. And this is so important for you to understand because the deductible. Objection, I don't want to pay my deductible or you know, help me save some money here that you're going to start seeing a lot. And it's really important for you to understand how to overcome it. So let me explain how it works. Right. By the way, so now that they've gotten this check for 9,000, this here, the difference between the ACV and RCV, okay? So what it's worth today versus what it's worth new. This difference is called the depreciation. Depreciation, Just like a car, a brand new car, you drive it off the lot, it depreciates in value, it goes down in value. And what they name this difference of going down in value is the difference between what it's worth right now versus what it costs to replace it. That's the depreciation and how they come up with actual cash value. Okay? Depreciation of a vehicle, $50,000 new. It's a five year old vehicle. You crash it, it's not worth 50 grand, it's worth 25,000. This difference here is the depreciation, you follow? Alright, now here's where it gets fun. The insurance company will pay the full $20,000 minus the deductible, okay. To get the roof done. So here's the catch. The only way for that homeowner to receive the total RCV or replacement cost value is to complete the work. To actually do it. Complete the work and invoice the insurance company. Invoice. I'm just going to write INSCO for short. Invoice the insurance company. Here's what that means to you. Hey Mr. Homeowner, you've received a check for the actual cash value minus your deductible. Okay? Now what we're going to do is assess the property, make sure everything has been documented properly on what you think the paperwork you might have received or will be receiving. We're going to go ahead and facilitate all those repairs line item by line items, you know exactly what we're doing. And then what we're going to do is we're going to invoice the insurance company saying hey, State Farm or Allstate or whoever it is, American family We did this. Customer's roof. Please release the depreciation that is left over. So once the insurance company sees the invoice and they say, yep, homeowner did the work, they're going to write the check for the difference of that, well, minus their deductible. So they're going to get another. I shouldn't have done this. I suck at math. Please correct me if I'm wrong. We're owed 10,000. Correct? 10,000 plus 1,000 is. Excuse me, 9,000 plus 1,000 is 10,000. Yep. So they're going to write a check for an additional. So plus $9,000. And this is what we call the depreciation when it's been released. Okay, so in other words, the insurance company is going to hold this money to them, close. Say, we're only going to release the depreciation when you actually do the work and prove it. This is incredibly important. There's two reasons that the insurance company does this. Okay, here's the first. Some homeowners are going to get tempted and say, meh, my roof's not that bad. I could use $9,000 right now. I'll let it be. And then they pocket the cash. So what happens is the insurance company, instead of writing this check for $19,000 out of the gate, they walked away instead of 19 grand, only owing 9,000. And here's the catch. This is critically important. Seasoned sales guys often don't know this. If that homeowner pockets the cash and doesn't do their roof, the insurance company not only saved $10,000, but guess what? That roof is no longer insured because the insurance company already paid out on it. That'd be like saying, I lost my wedding ring twice. They're like, but you lost it once and we paid you for it. How did you lose it again if you didn't buy a new one? Right? It just doesn't. It doesn't make sense. It doesn't add up. By the way, I have seen this happen in the field. Personally, I've worked on projects on a claim where I thought it was in the bag, and the adjusters showed me that claim had been paid. So the insurance company does it to protect their interests. Okay? They're paying less up front, and it's no longer insured. Now, here's the other thing. Homeowners remember I just talked about how the. In the car analogy, someone might look to save some money and buy that next car for $20,000 and then keep the $4,000 in their pocket. And I told you that doesn't work like this because the only way is to invoice the insurance company. So here's the funny part. If I do the roof not for 20,000, but for 18,000, and then I invoice the insurance company for, hey, I did it for 18,000, they are going to release up to that amount minus the deductible. So instead of releasing the 9000, they're only going to pay the additional 7 because it's the homeowner's responsibility to pay their deductible. And the only way to cheat this system, which people do, is free fraudulent. There are new laws that are coming into effect on a regular basis. I just did an interview with Ryan from Fund my deductible at the laws changing in Texas and all over the country. They're looking for this because it is fraudulent. And the only way is for that contractor to write an invoice with a fake amount. And that puts you, the contractor and the homeowner in a position of insurance fraud saying, we did it for this, but we're going to pocket the difference because you are providing false information. So this is how I explain the process. I use the analogy. And let's go a quick summary. We're going to wrap this up and then give you some tips to use the next time you present this. And again, remember, when you explain to that homeowner that the amount they'll release has to be invoiced to the insurance company and they're going to take that deductible out no matter what, and falsifying or playing any games is insurance fraud. And believe it or not, there are people behind bars right now for doing stuff like this. So don't do it. So let's just do a quick summary. I always explain this process to homeowners by using the analogy of a car. Okay? The top number of what the vehicle is worth is what's considered the replacement cost value. And these go up every year. So the replacement cost value on a roof is changing because material and labor rates fluctuate and usually they're going up. Okay, so this is the top line. What it costs to replace in today's market. But then the insurance company is going to look at the actual cash value. Okay? What the car or the roof is worth today in the condition that it's in, is it 10 years old, is it 5 years old, is it 20 years old? So they're going to write the actual cash value, then they're going to take out their deductible. That's the contractual agreement between the insurance company and the homeowner of what they've agreed already by setting up the policy. In this example, it's 1,000 bucks. So we have the actual cash value minus the deductible equals the first check. Okay? Now from that first check, the difference is with a car claim, they're going to pay the whole thing. People can pocket the cash, but when it comes to the roof claim, this first check is just basically enough to get the job started. Pay a deposit. Alright? Remember, if the homeowner doesn't do the work, the insurance company just saved $10,000 and they don't even have to insure the roof anymore because it was already paid for. Okay? So what you need to do is conduct all the repairs, make sure everything is listed on the insurance scope of loss, then you do the work, you invoice the insurance company and then they release what's called the depreciation, which is the difference between the new value and today's value. That's the depreciation. And they're going to release those funds at the end to the homeowner to then pay you and get you made whole. Got it? Alright. Now if you need to bring a little sketch pad, sketch this out for homeowners. It will help them make sense of it because all of them are thinking about this right here. How do I take this and save money? And when you can explain this process, now that you understand it, you see how to explain it. You can explain it whether you're seasoned, pro or brand new. And you're going to overcome that objection about the deductible and I don't want to pay it. How much can you save me? And you know exactly what to do from here moving forward. All right, listen, I've got some more videos coming soon on how to start reading these scopes of loss, what they all mean, how to communicate them to a homeowner. But for now, this video. Just because our time here is done, doesn't mean your and mine needs to be. So if you're new in roofing sales, hop into this playlist right here and I'm going to help you get brought up to speed really quickly. New in Roofing sales, start here. And if you're new here, jump in and download a free copy of my Pitch Like a Pro Roofing Sales Training Video Library. 120 videos plus organized by category, easy reference for you or your team. Download Pitch Like a Pro and hop into this playlist to learn more about how to become an ace in roofing sales. See you in the next one.