Roof ACV vs replacement cost in Texas

Short answer. Replacement cost pays to repair or rebuild at today's prices; actual cash value first subtracts depreciation, so on an older roof it may pay little or nothing. Some Texas rental policies pay the house at replacement cost but the roof at actual cash value or on an age schedule, so check the roof line on every quote and renewal.

That roof line is one of the most common hidden differences between two otherwise similar quotes. Replacement cost also has conditions: the dwelling limit (the amount the house itself is insured for) usually has to be at least 80% of what the house would cost to rebuild, and the full amount is often paid only after the repair is done.

Roofs are often settled on their own terms

A policy can say "replacement cost" for the house and still settle the roof differently. A roof may be settled on any of three bases:

• Replacement cost for the roof, like the rest of the house.
• Actual cash value for the roof only.
• An age schedule, where the policy states how much of the roof's cost is payable at each age. The schedule itself decides the answer, so read it word for word.

The Texas Department of Insurance (TDI) warns that "As roofs age, some companies will switch to actual cash value," and advises: "When you renew your policy, check to see if there are changes to your roof coverage" (TDI, Insurance and your roof, updated April 1, 2026). It also notes that "if your roof is in poor condition, your company might not cover your roof at all," and that "your insurance company won't pay for a new roof just because it's old or worn out."

Whether an insurance company may turn down a house because the roof is old is a separate question from how a roof claim is paid. A Texas rule says an insurer "may not decline to write residential property insurance based on the age of the property," and TDI reads it as covering renewals too; on its wording it appears to reach landlord (dwelling) policies from Texas-licensed insurers, but whether it reaches surplus-lines insurers is not settled (28 TAC §21.1006). The details, including TDI's proposal of September 29, 2026 to name the roof directly: How old can a roof be to insure in Texas?

For a single-family home or duplex insured by a Texas-licensed insurer, a change on renewal that reduces coverage must appear "in a conspicuous place in the notice of renewal," in plain language, at least 30 days before the renewal date (Ins. Code §551.102, §551.1055). Surplus-lines insurers and larger rentals can differ. Either way, read the renewal notice rather than the price alone.

Lenders don't always require replacement cost on the roof. For loans sold to Fannie Mae, "Roofs must be insured, but do not have to be insured on a replacement cost basis" (Fannie Mae B7-3-02, August 5, 2026). So a lender's acceptance of a policy is not a sign the roof is on replacement cost.

Replaced the roof? Tell your insurance company or your agent. A roof's age can affect your price and how a roof claim is paid. What paperwork to keep: roof age.

The two settlement bases, in TDI's words

TDI defines them this way (TDI Home insurance guide):

• "Replacement cost coverage pays to repair or replace your house and personal property at current prices."
• "Actual cash value coverage pays replacement cost minus depreciation. Depreciation is a decrease in value because of wear and age."

TDI adds that "Policies with actual cash value coverage cost less, but they also pay less when you have a claim" (TDI, Replacement cost or actual cash value).

TDI's roof example

TDI illustrates the difference with a $200,000 home with a 2% ($4,000) deductible, and a roof that costs $10,000 to replace (TDI, updated January 24, 2024):

On a replacement cost basis, the payment is the same at any roof age: $10,000 minus the $4,000 deductible. On an actual cash value basis, depreciation comes off first ($8,500 minus the deductible leaves $4,500), and on the 20-year-old roof nothing is left after the deductible. These are TDI's example figures, not a quote.

In Texas the deductible on a roof claim is often the separate wind and hail deductible, frequently a percentage of the dwelling limit. Depreciation and a percentage deductible together can leave very little. See Texas wind and hail deductibles, explained.

Replacement cost is often paid in two parts

If the policy is on replacement cost, many policies pay actual cash value first, then the depreciation that was held back once the repair is done (some pay as work progresses). TDI has its own standard dwelling form, the Texas Dwelling Policy Form 3 (TDP-3, last revised in 2002). Insurers may still use it, but many now use their own approved forms (Ins. Code §2301.052), and surplus-lines insurers use theirs; we quote it because it is public. It says the insurer "will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed," and that the repair "must be completed within 365 days after loss unless you request in writing that this time limit be extended for an additional 180 days" (TDP-3, Loss Settlement).

An illustration (invented numbers, the same as in our claims film). A covered repair is estimated at $10,100, with $2,150 of depreciation and a $1,500 deductible. The first payment is $10,100 − $2,150 − $1,500 = $6,450. On a replacement cost policy, the $2,150 of depreciation may be paid after the repair is completed. On an actual cash value policy it is not paid later. Filing the claim itself: Texas storm and hail claims on a rental.

On the same form, some items are settled at actual cash value even when the house is on replacement cost: personal property, wall-to-wall carpeting, cloth awnings and fences.

The 80% condition: keep the dwelling limit current

On the TDP-3, full replacement-cost settlement applies only if "the Coverage A (Dwelling) limit of liability is 80% or more of the full replacement cost of the dwelling" at the time of loss. Below that, the policy pays "a proportionate share," or the actual cash value of the damage if that is more (TDP-3). Other forms have similar clauses.

An illustration (in percentages). Say your dwelling limit is 70% of what the house would cost to rebuild; it should be at least 80%. 70 ÷ 80 = 87.5%, so the policy pays 87.5% of the covered repair cost (or the actual cash value of the damage, if that is more), instead of the full cost. How the deductible fits into that calculation depends on the form's wording.

A limit set years ago, while building costs rose, is one of the quieter ways a rental ends up underinsured. Some policies offer extended replacement cost, a cushion above the dwelling limit for when rebuilding costs more than the estimate. It raises the amount available to rebuild; it does not change the deductibles. Changing insurance companies at renewal is a good moment to check all of this; see How to switch rental insurance in Texas.

Questions to ask about any quote

• Is the house on replacement cost or actual cash value?
• Is the roof settled differently? On what basis, or by what schedule?
• Did the roof basis change at this renewal?
• Is the dwelling limit at least 80% of today's rebuilding cost?
• Is extended replacement cost available or included?
• What is the wind and hail deductible in dollars?

AIV Insurance is an independent insurance agency in Texas. We check how a quote pays for the roof and explain it before you choose. We are not an insurance company, and your policy and insurance company decide what a claim pays. To go through your own declarations page, email it to us at hello@aivinsurance.com.