Roof Insurance Depreciation in Texas: How It Works

By Fareed Tulbah, owner of Caden Roofing · 8,000+ roofs inspected · Last updated November 4, 2026

paid on a 20-year-old roof under an ACV policy with a 2% deductible, in TDI’s example

Source: Texas Department of Insurance

25%

of replacement cost paid on a shingle roof 30+ years old under Allstate’s roof schedule

Source: Allstate Roof Surface Payment Schedule

No set deadline

in Texas law for recoverable depreciation; each policy sets its own

Source: Texas SB 2575 (2025), which did not pass

Quick Answer

Roof insurance depreciation is the value your roof has already used up: the difference between what a new roof costs (replacement cost) and what your current roof was worth the day of the storm (actual cash value, or ACV). The first insurance payment is almost always the ACV minus your deductible.

Replacement cost − depreciation = actual cash value. Actual cash value − deductible = your first payment.

On a replacement cost (RCV) policy, the depreciation is paid in a second payment once the carrier gets a final invoice showing the roof is replaced. On an ACV policy or a roof payment schedule, the depreciation is never paid; that part of the roof is yours to cover. Your adjuster’s estimate shows which type of coverage your roof has, and this guide shows you exactly where to look, using two real Southwest Austin claims.

A Caden Roofing insurance roof replacement in Round Rock, Texas.

Why is my roof insurance payment so small?

This is one of the most common questions Caden Roofing receives after a storm. A homeowner receives a payment of $2,000 or $4,000 on a roof that costs $25,000 to replace and concludes that the insurance company underpaid.

In most cases, the homeowner has not been underpaid. On a replacement cost policy with no roof payment schedule or ACV roof endorsement, the carrier pays the benefits in two installments, and the first payment is only the first installment.

The first payment equals the value of the existing roof as of the date of loss, minus the deductible. The carrier pays the depreciation, which represents the portion of the roof’s service life already consumed, in a second installment once the replacement is complete and the carrier has the final invoice. According to the Texas Department of Insurance (TDI), replacement cost coverage pays in two installments, the first of which is a partial payment.

The first payment, then, is not the full amount owed. It is the first of two.

The exception is the actual cash value (ACV) policy, which is becoming more common. Caden Roofing once saw few ACV roof claims in Austin. They now appear regularly, together with roof payment schedules that pay a fixed percentage based on the roof’s age. Under those policies, the first payment is the entire contribution from the homeowner’s policy benefits. For that reason, Caden Roofing reviews the adjuster’s estimate on every claim before advising a homeowner what to expect.

A second Austin claim later in this guide, on an ACV roof policy, shows the other result: the homeowner paid $27,144 of a $32,171 roof.

Is roof insurance depreciation the same as tax depreciation?

No. The term is the same, and each version reflects a loss of value over time, but insurance depreciation, tax depreciation and accounting depreciation are three separate calculations with different purposes. Homeowners frequently confuse them, and that confusion often explains why the first insurance payment comes as a surprise.

Tax depreciation is a deduction

The IRS allows the owner of rental or business property to deduct its cost over a fixed recovery period: 27.5 years for residential rental buildings and 39 years for commercial buildings. The IRS does not allow depreciation on a personal residence, except for any portion used for business or rented out. Whether a homeowner has ever claimed tax depreciation has no effect on an insurance claim.

Accounting depreciation is a bookkeeping entry

Accounting depreciation allocates the original purchase price of an asset across its useful life. The entry begins with what was paid, declines on a fixed schedule, and never reverses.

Insurance depreciation is a valuation

Insurance depreciation begins with the cost to replace the item today, not its original price, and estimates the share of its service life already used, based on age and condition, line item by line item. On a replacement cost policy with no roof payment schedule or ACV roof endorsement, roof depreciation is also recoverable: the carrier pays the depreciation once the replacement is complete.

	Tax depreciation	Accounting depreciation	Insurance depreciation
What it is	A deduction that reduces taxable income	An entry that allocates a cost over time	An estimate of value lost to age
Starting point	Original cost	Original cost	Current replacement cost
Schedule	Set by the IRS: 27.5 or 39 years for buildings	Set by the owner’s accounting policy	Set item by item, from each component’s life expectancy and the adjuster’s age and condition entries
Applies to a personal residence?	No	No	Yes, on every claim
Recovered later?	No	No	Yes on a replacement cost policy with no roof schedule or ACV roof endorsement, after the work. No otherwise.

One further distinction: tax and accounting depreciation apply to the building as a whole. Insurance depreciation applies separately to the shingles, underlayment, flashings, vents and every other item on the estimate, as the next section explains.

How does the adjuster calculate depreciation on a roof?

The adjuster’s inspection serves two purposes: to determine what the storm damaged, and to record the facts about the roof that drive the estimate. Those facts include measurements, pitch, number of layers and type of shingle, and, most important for depreciation, the roof’s age and condition.

The adjuster then prepares the estimate, typically in one of two software programs:

Program	Developer	Notes
Xactimate	Verisk, a publicly traded data company with 2025 revenue above $3 billion	The industry standard since 1986. Both estimates in this guide were prepared in Xactimate.
Symbility	Cotality, formerly CoreLogic	Founded in 2004 and acquired by CoreLogic in 2018. Used by a smaller share of carriers.

Homeowners are rarely told that the unit prices on the estimate come from a regional price list built into the software, not from Caden Roofing or from the adjuster’s judgment. Verisk updates its price lists monthly. The two estimates in this guide used price lists coded “TXAU8X_JUL24” and “TXAU8X_MAY25,” meaning Austin, July 2024 and Austin, May 2025.

Depreciation works the same way. The adjuster enters the roof’s age and condition, and the software applies a separate depreciation schedule to each line item, because each component of a roof has its own life expectancy. The figures below come from the first Southwest Austin estimate in this guide, a roof entered at 15 years old:

Roof component	Life expectancy in the estimate	Depreciation at 15 years
Laminated (architectural) shingles	30 years	50%
Hip and ridge cap	30 years	50%
Drip edge, pipe flashings, rain caps	35 years	42.86%
Skylight cladding	18 years	83.33%
New synthetic underlayment	20 years	0% (entered at age 0)
Tear-off and steep-roof labor charges	Not depreciated	0%

The 30-year shingle life reflects the manufacturer’s rating; in Caden Roofing’s experience, no shingle lasts 30 years in Texas. Condition also affects the calculation: in Xactimate, an item rated “Below Average” receives 40% more depreciation than normal, and an item rated “Above Average” receives 40% less.

The largest depreciation figure on the estimate, on the shingle line, therefore depends almost entirely on a single input: the roof age the adjuster entered.

How does the insurance company set your roof’s age for depreciation?

In Caden Roofing’s experience, carriers establish a roof’s age in one of three ways, generally in this order.

1. The carrier’s records and data

The age in the policy file comes first. The second estimate in this guide states this directly: the carrier based the depreciation age on the last reported roof replacement or construction date in the policy information.

Carriers supplement that file with two types of purchased reports. The first is a claims history report. Nearly every carrier reports claims to a shared LexisNexis database called CLUE, which lists up to seven years of claims on a property, including claims filed under a previous owner. A prior roof claim on that report can indicate when the roof was last replaced.

The second is a roof-age report. Verisk, LexisNexis and other vendors sell these reports, built from building permits, aerial imagery, county assessor records and past claims. Data vendors report that homeowner-supplied roof ages are often five to 15 years too low.

2. The homeowner

At nearly every inspection, the adjuster asks the homeowner how old the roof is and when it was last replaced. The first estimate in this guide notes that the carrier asked the homeowner to help establish the age and condition of the damaged items.

3. The adjuster’s estimate

When neither the records nor the homeowner can establish the age, the adjuster estimates it from the roof’s appearance.

What this means for homeowners

Keep the records from the last roof replacement: the invoice, the permit and the shingle warranty registration. Those documents establish the correct age if the carrier’s figure is wrong. On the shingle line of the first estimate in this guide, each year of age changes the actual cash value by about $530, while the estimate’s replacement cost total stays the same. Under a replacement cost policy with no roof payment schedule, that amount shifts between the first and second payments. Under an ACV policy, the amount comes directly out of the total proceeds.

TDI notes that homeowners can request a free copy of their CLUE report from LexisNexis once a year.

What does depreciation look like on a real Austin roof claim?

Carriers wrote the two estimates below for Caden Roofing customers in Southwest Austin, one year apart. Both homes have laminated shingle roofs of similar size. The differences are the roof’s age and the type of policy. The final row shows the result.

	Claim 1: RCV policy (2024)	Claim 2: ACV roof policy (2025)
Roof age the adjuster used	15 years	20 years
Full replacement cost (RCV)	$28,989.24	$32,171.10
Depreciation	$9,792.46	$19,620.85
Of which non-recoverable	$0	$18,934.46
Actual cash value (ACV)	$19,196.78	$12,550.25
Deductible	$2,000 (flat)	$8,210 (1% of dwelling coverage)
First payment	$17,196.78	$4,340.25
Second payment after the work	$9,792.46	$686.39 (windows only)
Maximum policy payment	$26,989.24	$5,026.64
Homeowner’s share of the estimate	$2,000	$27,144.46

Claim 1: a replacement cost policy

On a $28,989.24 estimate, the carrier’s first payment was $17,196.78. Of the balance, $9,792.46 was recoverable depreciation, payable once the roof was replaced, and $2,000 was the homeowner’s deductible. Caden Roofing replaced the roof and submitted the final invoice, and the carrier paid the $9,792.46 three weeks later. The homeowner’s only cost was the deductible.

This estimate also went through a supplement review, and the carrier did not finalize it until eight months after the storm. An initial estimate is often revised. When the actual roof differs from the estimate, in measurements or in components the adjuster missed or miscounted, Caden Roofing submits a supplement to the carrier. Because the software calculates depreciation from the estimate, an incomplete estimate also reduces the second payment.

Claim 2: an ACV roof policy

The second claim came from the same part of Austin one year later. The roof was 20 years old, and the policy paid roof damage at actual cash value. The estimate stated that the depreciation applied to the roof was non-recoverable and would be an out-of-pocket expense paid directly to the roofer. Only the window items, $686.39, were recoverable.

The deductible was 1% of the home’s $821,000 dwelling coverage, or $8,210. Combined, the non-recoverable depreciation and the deductible reduced the payment to $4,340.25 on a $32,171.10 estimate.

The homeowner had done nothing to cause this result. TDI notes that as roofs age, some companies switch roof coverage to actual cash value at renewal, and that the company should notify the policyholder of the change. The section on replacement cost policies below explains how this provision works.

How do you read depreciation on a roof insurance estimate?

Two parts of the estimate tell most of the story: the summary page, usually the last page of figures, and the depreciation column on the line items.

The summary lines

Line on the estimate	What it means
Replacement Cost Value (RCV)	The cost to replace everything on the estimate at current local prices, including material sales tax
Less Depreciation	The total deduction based on the age of each line item
Actual Cash Value (ACV)	RCV minus depreciation: the value of the damaged items on the date of loss
Less Deductible	The homeowner’s share of the loss. On most Texas policies, wind and hail losses use a percentage of the dwelling coverage
Net Claim	The amount of the first payment
Total Recoverable Depreciation	Depreciation the carrier will pay after the work is complete
Non-Recoverable Depreciation	Depreciation the carrier will not pay. If this line appears for roof items, the roof is covered at actual cash value or on a payment schedule
Net Claim if Depreciation is Recovered	The maximum the carrier will pay under the policy’s coverage for this claim

Parentheses or angle brackets?

In Xactimate estimates such as the two in this guide, the depreciation column uses two formats:

(1,234.56) in parentheses: recoverable depreciation, paid after the work is complete.
<1,234.56> in angle brackets: non-recoverable depreciation, which will not be paid.

On Claim 2, every roof line showed depreciation in angle brackets, and only the window items showed parentheses. That formatting alone revealed how the policy treated the roof before the summary page.

Two other details to check

The deductible. A deductible shown as “1%” or “2%” is a percentage of the Coverage A dwelling limit, not of the amount of the loss.
“[M]” beside a depreciation percentage means the depreciation on that item reached the maximum the carrier allows. On Claim 2, that maximum was 90%. Line items do not depreciate to zero.

How do RCV, ACV and roof payment schedules treat depreciation?

Texas homeowners policies cover a roof in one of three ways. The table shows how each treats depreciation.

	Replacement cost (RCV)	Actual cash value (ACV)	Roof payment schedule
What it pays	Full cost to replace, minus the deductible	Replacement cost minus depreciation, minus the deductible	A fixed percentage of replacement cost based on roof age and material, minus the deductible
Number of payments	Two	One	One
Depreciation paid later?	Yes, after the work is complete	No	No
Common on	Most policies and newer roofs	Older roofs and lower-premium policies	Some carriers’ base policies

The Texas Department of Insurance example

TDI uses a $10,000 roof on a $200,000 home with a 2% ($4,000) deductible. A replacement cost policy pays $6,000 regardless of the roof’s age. An ACV policy pays according to age:

Roof age	ACV of the roof	Minus deductible	Policy pays
5 years	$8,500	−$4,000	$4,500
10 years	$7,000	−$4,000	$3,000
20 years	$4,000	−$4,000	$0

The $0 is TDI’s own figure: on an ACV policy with a 2% deductible, a 20-year-old roof can be a total loss and the policy pays nothing.

Roof payment schedules

A roof payment schedule is a chart printed in the policy. Allstate is the carrier on which Caden Roofing sees them most often. Allstate’s published Roof Surface Payment Schedule pays a composition shingle roof at 97% of replacement cost in year one, 85% at five years and 70% at ten years, declining to 25% at 30 years and older. Other roof materials follow different schedules. The percentage applies to all roof surface components and installation, including labor, overhead, profit, taxes and fees, and the deductible is then subtracted. Other carriers use similar charts with different percentages, and the figures vary by policy edition, so the chart that governs a claim is the one in that homeowner’s policy.

What Texas says carriers cannot deduct

TDI has advised insurers twice, in 1998 and again in 2008, that when they calculate actual cash value under a replacement cost policy, they may not deduct contractor’s overhead and profit or sales tax in addition to depreciation. TDI considers that an improper claim settlement practice. Whether a carrier can depreciate labor is a separate question that depends on the wording of each policy.

Why didn’t my replacement cost policy pay the roof depreciation?

Usually because of a roof endorsement. Many Texas homeowners policies list the dwelling at replacement cost on the declarations page while an endorsement changes how the policy pays for the roof. Under those endorsements, the carrier settles wind and hail damage to the roof surface at actual cash value or on a payment schedule, and the rest of the home remains at replacement cost.

TDI approves these endorsements and carriers disclose them, but homeowners often miss them. They typically appear in the list of forms attached to the policy rather than on the first page. Claim 2 in this guide is an example: the estimate stated that the policy settled roofing at actual cash value, while the carrier paid the window damage on the same claim at replacement cost.

Endorsement titles to look for include “Actual Cash Value Loss Settlement – Windstorm or Hail Losses to Roof Surfacing,” “Roof Surfaces Payment Schedule,” “Roof Surfacing” and “Loss Settlement.” Some carriers offer an endorsement that restores replacement cost on the roof for an added premium.

Texas law requires an insurer that reduces coverage at renewal to give written notice at least 30 days before the renewal date, in plain language and in a conspicuous place in the renewal notice. In practice, that notice is often a single paragraph in a renewal packet. Since March 2026, Fannie Mae and Freddie Mac have also allowed lenders to accept actual cash value roof coverage, so a mortgage lender may no longer flag the change.

How is the recoverable depreciation payment released?

On a replacement cost policy with no roof payment schedule or ACV roof endorsement, Caden Roofing follows the same sequence on every insurance project:

Caden Roofing replaces the roof.
Caden Roofing submits a supplement when needed. If the installed roof differs from the estimate, in squares or in components the adjuster missed, the supplement goes to the carrier with photos and documentation.
Next, Caden Roofing submits the final invoice. The final invoice releases the recoverable depreciation. Some carriers also require a certificate of completion or photos.
The carrier issues the second payment. In Caden Roofing’s experience, payment within 7 days is rare, 3 to 8 weeks is typical, and some payments have taken up to 6 months. When a payment runs late, Caden Roofing follows up with the carrier for its clients until the payment arrives.

The deadline for recoverable depreciation

Replacement cost policies set a time limit for completing the work and requesting the recoverable depreciation. Caden Roofing has seen limits as short as six months. One year is common, and some carriers allow about two years. The starting date also varies: the clock may begin on the date of loss, the date the claim was filed or the date of the first payment. Carriers have shortened these windows in recent years.

The deadline appears in the policy’s Loss Settlement or Conditions section and is often repeated in the claim payment letter. It usually does not appear on the adjuster’s estimate. An insurance agent can confirm the deadline. If the deadline passes, the carrier may decline to pay the depreciation.

Paying the deductible

Texas law requires the homeowner to pay the full deductible and makes it illegal for a contractor to waive, absorb or rebate the deductible. A carrier may request proof of the deductible payment before issuing the depreciation payment. Caden Roofing offers financing and accepts cash, personal checks, cashier’s checks and ACH transfers.

What are your options when roof depreciation is non-recoverable?

When the roof is covered at actual cash value, there is no recoverable depreciation, and therefore no deadline for completing the work. The first payment is the entire contribution from the policy benefits for the roof. If the home has no mortgage, the homeowner decides when to replace the roof.

Homeowners in this position generally choose one of three options:

Replace now. The ACV payment, combined with the homeowner’s own funds, pays for the new roof. Caden Roofing prepares a detailed estimate with options, so the homeowner can compare costs.
Wait. If the home has no mortgage and the roof is not leaking, the homeowner can hold the funds and replace the roof later.
Upgrade. Because the homeowner is paying a large share regardless, this is often the right time to consider an impact-rated shingle, a FORTIFIED roof or a standing seam metal roof. The guide on whether Class 4 shingles are worth it in Texas explains the premium-discount calculation.

Two considerations before waiting

The mortgage. Most Texas home loans use a standard deed of trust that requires insurance proceeds to be applied to repairing the property, as long as the repair is economically feasible and the lender’s security is not reduced, unless the lender agrees otherwise in writing. Carriers often make claim payments payable to both the homeowner and the lender, and the lender may hold the funds until the work is complete. Under Texas Insurance Code Chapter 557, a lender holding claim proceeds must explain its release requirements within 10 days, and must release the funds or explain why not within 10 days of a request.
Damage already paid. If the homeowner does not replace the roof and another storm causes damage, the carrier may not pay again for damage it has already paid. Check how the policy addresses repeat damage before deciding to wait. Any recoverable portion of the estimate, such as windows, gutters or interior items, remains subject to its own deadline.

How does Caden Roofing help its clients with depreciation on a roof claim?

When an Austin-area homeowner hires Caden Roofing to repair or replace a storm-damaged roof, Caden Roofing supports the homeowner through the insurance claim process to completion, including:

Inspection and photo documentation before the adjuster’s visit
Meeting the adjuster at the inspection
Reviewing the estimate with the homeowner: policy type, deductible, recoverable and non-recoverable depreciation, and the deadline
Supplements when the actual roof differs from the estimate
The final invoice and completion documents that release the depreciation
Follow-up with the carrier until the second payment arrives

Caden Roofing is a vendor for USAA, State Farm, Travelers, AAA and Chubb, and recent Austin-area work appears on the Caden Roofing projects page. When the homeowner and the carrier still disagree on the amount after a supplement, the guide to the insurance appraisal process explains the next step.

Have a roof claim? Call Caden Roofing.

Caden Roofing will take it from here, from understanding your insurance paperwork to the new roof to seeing it all the way through to the final depreciation payment.

Call (512) 364-0278, email [email protected], or request an inspection online.

Frequently asked questions

Is recoverable depreciation the same as my deductible?

No. The deductible is the homeowner’s share of the loss, and the carrier never pays the deductible. Roof depreciation is recoverable only on a replacement cost policy with no roof payment schedule or ACV roof endorsement. On those policies, the carrier pays the recoverable depreciation once the work is complete. On Claim 1, the deductible was $2,000 and the recoverable depreciation was $9,792.46, shown as separate lines on the summary page.

Can I keep the first payment and not replace the roof?

On a replacement cost policy with no roof payment schedule or ACV roof endorsement, the homeowner who does not complete the work forfeits the recoverable depreciation, which on an older roof can be a third or more of the total payment. On an ACV policy, the first payment is the entire contribution from the policy benefits. In either case, if the home has a mortgage, the standard deed of trust generally requires the homeowner to use the proceeds for repairs unless the lender agrees otherwise, and the carrier may not pay again for the same damage.

What if the new roof costs less than the estimate?

Carriers generally pay recoverable depreciation only up to the amount spent on the work. If the final invoice is lower than the replacement cost on the estimate, the carrier reduces the second payment accordingly.

What if the adjuster used the wrong age for my roof?

Documentation corrects the age: the invoice from the last roof replacement, the building permit or the shingle warranty registration. The roof’s age never changes the estimate’s replacement cost total. It changes the actual cash value of the claimed items, and the effect depends on the policy. On a replacement cost policy with no roof payment schedule or ACV roof endorsement, age changes only the pace of payment: how much arrives in the first payment and how much after the work is complete. On an ACV policy or a roof payment schedule, age changes the total proceeds the homeowner receives.

Does Texas law set a deadline for recoverable depreciation?

No. A 2025 bill, SB 2575, would have given homeowners two years from the first payment, but the bill did not pass. Each policy sets its own deadline. In Caden Roofing’s experience, limits range from six months to about two years, and the starting date varies by carrier.

Why is my wind and hail deductible so much larger than my other deductible?

Many Texas policies use a percentage deductible for wind and hail, commonly 1% or 2% of the dwelling coverage. On a home with $800,000 in dwelling coverage, 1% is $8,000 and 2% is $16,000. The amount appears on the declarations page.

Sources

Fareed Tulbah is the owner of Caden Roofing in Austin, Texas. He has personally inspected more than 8,000 roofs and has supervised every Caden Roofing installation since 2009. Caden Roofing is an IBHS FORTIFIED Certified Roofing Contractor, an Owens Corning Preferred Contractor and a GAF Certified Contractor.

How Does Depreciation Work on a Roof Insurance Claim in Texas?