How to Read and Understand a Roofing Insurance Claim report
If you have never filed a property claim before, you may be feeling a bit intimidated by trying to read and understand your claim summary, or insurance loss statement. No matter how educated or technical you may be if you have never read one these reports before it can be frustrating. it is unfamiliar to most of us initially, so I am happy to walk you through the different parts of an insurance claim report.
A claim summary is an insurance adjuster’s estimate of the expected cost to repair your damages. I will only address a property claim today, not automobile claims. It may be easier to address the general aspects first with increasing attention to specifics.
The property and casualty insurance industry primarily uses software called Xactware to format these estimates. The exact program is called Xactimate. Xactware conducts ongoing research on fair market pricing for both materials and labor and adjusts its city or region-specific pricelists monthly. They call certain retailers and contractors to determine price changes and modify accordingly. New price lists are then downloaded monthly by the subscribers. We also choose to subscribe to and use this software for our estimates in order to stay in line with insurance pricing.
The software is component based, which means it breaks down each step or component of the repair into separate lines in a spreadsheet format. You won’t find labor and materials broken out, but both are factored into the pricing for each component.
A Claim Summary is Basically a Collection of Spreadsheets
- 1. The claim summary is sectioned off into separate spreadsheets; generally, there is one for the roof, the front of the house, the left side of the house, the rear of the house and the right side of the house and the interior. All of these areas are classified as a dwelling.
Picture the adjuster walking the property and noting any damages on each side of the house before inspecting the next side of the home. Then it makes more sense. They refer to the sides of the house as “elevations.” This does not mean the first or second story. It is a Xactimate term that just means the side of the house. All the repairs on one side are included in the spreadsheet for that elevation- gutters, windows, window screens, painting… You generally do not find all the gutters grouped together and the windows grouped together, etc. You can take your claim summary and walk your house, one elevation at a time, in the order that it is listed and see the repairs the adjuster included in your claim.
- 2. Another section on the claim summary may be listed as other structure or detached structure.
Any nonattached buildings like sheds, gazebos, playhouses, etc. are listed in their own spreadsheet section. They are usually labeled “Other Structures” or something more specific.
- 3. The final section on a claim summary if any of these items were damaged on your property would be labeled as contents.
Patio furniture, grill or spa covers, mailboxes or other personal items that are damaged are labeled as “Contents” and often get their own spreadsheet section.
Base service charges and dumpster fees are sometimes listed at the end of the claim. These are incorporated if there are small repairs, like one or two window screens or a very small stucco patch that would be hard to get someone out to take care of with the standard pricing. Think of this section as trip charges that are incurred by some repair companies. Not all insurance companies include these in their claim summaries.
All of these separate spreadsheets are totaled in the Summary located at the end, or sometimes on the first page of the loss statement. Some insurance companies use a version of Xactimate that creates separate Summaries for the Dwelling (the main house), the Other Structures, the Contents and in some cases Loss of Use. If there are code upgrades, there could be a separate summary for just the code upgrades. They will often not pay for code upgrades up front and allow the contractor to bill for those at the end “if incurred.” Other versions of Xactimate will group all of these into one Summary page. Each insurance company tweaks the software to how they like it, so they are slightly different based on which version of Xactimate your insurance company is using.
Another aspect of the claim summaries that varies with the different versions of the software used is the designation of material sales tax, overhead and profit, and base service charges. The newer versions of Xactimate include a column in each spreadsheet section listing the amount of material sales tax and o/p for each line item. Other versions do not include this column in the individual line items, but instead, show these only on the summary pages. USAA chooses to use the latter format. In either case, the amount is the same, but it is just shown differently.
The summary page will have the line item totals plus material sales tax. If overhead and profit are added to the claim, that will then be shown and added in to get the RCV or the Replacement Cost Value. The depreciation is then deducted to get what they call the ACV, or the actual cash value of the claim. Think of this as everything included except the holdback. The summary will then deduct the deductible to arrive at the Net Claim or Net Actual Cash Value. The net claim reflects the amount of the check given to you to get the work started. You can assume that the recoverable depreciation will be paid later, but the deductible is never paid by the insurance company. It is the predetermined amount that is deducted and the homeowner has to pay out of pocket.
“Why does my insurance check seem so small?”
The biggest concern I hear from clients is that the check they received with the loss statement, or the claim summary, “is not enough to cover the repairs.” The insurance companies attempt to explain this in a paragraph usually found on the second or third page of the claim. The payment for the repairs is broken up into two payments. The first one (net claim) is just to get the work started. Once an invoice for work completed is submitted to the insurance company, the rest of the funds are released. Think of it as their own insurance that the money will be spent on the repairs and not a family vacation. In the end, everything ends up being paid for except the deductible.
How do I Interpret the documents?
Each section of the document is made up of columns and rows.
- The first column is a Description of the item to be repaired. Every component is listed separately- the removal of the shingles, the felt paper, the installation of the shingles, the vents, the painting of the pipe jacks… If the section is describing paint, it will list each step in the Description column- prepare, cover and protect, ladder jacks, apply one coat of paint…. This is why it is referred to as component-based software.
- The second column refers to the Quantity. Each component has its own measurement unit, whether it is square feet or linear feet or the number of items. The square footage of the roof is based on SQ or 100 square feet. If your roof is 2500 square feet, it will be listed as 25 SQ. if you have four turtle vents, then it will say 4 EA. This is the fundamental reason why each component has to be listed separately as its own line item.
- The third column on each of the spreadsheets refers to the Unit Price. This is what changes with fair market pricing research. It varies slightly from month to month and includes the labor and material cost combined. You multiply this Unit Price by the Quantity to get the RCV.
As stated, the newest versions include a fourth column showing how much material sales tax and o/p is added for each component. Labor items do not get depreciated or material sales tax. The other versions will have the RCV column listed fourth. If you refer to the bottom of each section you will see the total (or subtotal) of the RCV for the items listed in that section. Each section has its own total.
- The Depreciation column is listed next showing how much depreciation has been withheld for each component. The total for that is listed at the bottom of each section.
- The last column on the far right is the ACV, or actual cash value column. It shows how much is paid upfront on the first check for each component. There is a total at the bottom of each section. This is helpful when determining how much you have been paid in advance for each repair.
How do I figure out the total amount the insurance is paying?
Figuring out the costs of the repairs tends to be the most confusing part. The full cost of the repairs is the RCV, or the Replacement Cost Value. If there are multiple Summaries, you will need to add all the RCV’s together for the full amount of the repairs. The RCV includes the depreciation, the taxes, and the overhead and profit. It also includes the deductible amount. It is the grand total. On each section of spreadsheets, there is a column labeled RCV. If you see a column to the left of this labeled “taxes” or “other” then it is likely to represent the full RCV for that section or elevation. In the earlier versions of the software, the column breaking out the taxes and other for each line item or component is missing. In this case, you have an RCV subtotal represented. You have to refer to the summary page to make sure you have everything figured in.
The depreciation is the amount held back by the insurance company, but in most cases is recovered at the end of the project. If there are <> symbols around the depreciation amount, then it is non-recoverable, which is not given to the insured. This is seen on actual cash value policies and often on fences, sheds, and some cedar shake roofs. It is labeled on the summary pages as non-recoverable depreciation. The vast majority of depreciation is recoverable. On the spreadsheets for each section, you will see a column listing the amount of depreciation for each line item as well as a subtotal at the bottom of each section. It is usually the second column from the right.
For example, to know what the insurance is paying for the roof, you will need to see the totals at the bottom of that section. If there are several roofs, don’t forget to add them together. If you want to know what insurance is paying for gutters, you may need to go through the sections for each elevation and pull out the RCV amount for each line item describing gutters. Some claim summaries include a trade summary page, but it can be misleading as some items are coded differently when being entered. For instance, painting a pipe jack could show up as painting, but it would be done by the roofer. Some of the roof items can show up as HVAC. I always prefer to go through each section and total up the line item RCV’s that pertain to the trade I am figuring.
The bottom line, if you want to know how much you will receive from the insurance company for the claim, most of the time all you have to do is add up the RCV totals on all the summaries and deduct the deductible. If there is non-recoverable depreciation, deduct that too. That is the full amount you will receive from the insurance company for your claim.
A claim summary can range from 4-100’s of pages, depending on how detailed the adjuster is in his or her notes and the extent of damages you incurred. The average length for a hail claim is 5-15 pages.
Most claim summaries are formatted pretty similarly because nearly all of the insurance companies now use Xactimate to generate their estimates. Each company has their own twist on how it is presented, but the overall per unit pricing is fairly consistent. Differences are more likely to be seen on which components are included or omitted from the claim.
When looking at a claim summary for a client, I tend to glance at the Summary Page first and then tackle it in sections. If I need to figure out how much is allowed for each trade, I go through each elevation and pull out that trade, keeping in mind that some elevations have more damage than others. I always check to make sure the depreciation is recoverable and if there are base service charges or haul off fees that need to be accounted for in specific trades. I note the ACV and the RCV totals as well as the Net Claim totals. If you read your claim summary in this manner, it should be easier to understand fully. It is important to understand exactly what you have been paid and will be paid ultimately when hiring contractors to complete the repairs. Supplements may be needed to get approval for components that are omitted or correct the quantity on a specific component. If this is the case, a revised claim summary in writing should be obtained before starting the repairs.
Our office and project managers often assist in clarifying questions on claim summaries for our clients. If in doubt, it is an excellent idea to call the office or ask your project manager specific questions regarding your own claim summary.
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Claims Pro Restoration is an insurance restoration contractor. As one of the premier contractor in Austin, TX, we have a former insurance adjuster on our team and HAAG Certified inspector. We don’t provide insurance adjusting services for that is the responsibility of the insurance company. We are more than willing to share our insurance restoration experience with you. It is illegal for a contractor to act as an insurance adjuster. The information that has been provided is not legal advice, nor are we acting as insurance experts, we are only sharing our experience in the insurance restoration industry.