A "Free Roof". Is it Illegal?

Updated: Jan 6, 2020

You've probably heard about people getting a "free roof". Usually you'll hear these claims when your neighborhood is impacted by strong winds or hail damage. A roofing company might try to increase their sales by promising the homeowners a "Free Roof". What about the deductible?

All Types of Insurance Policies have Deductibles?

There is typically always a deductible when any type of insurance claim if made. Car insurance, health insurance, and homeowners insurance all have deductibles. When we go to the doctor we never think about getting out of paying the deductible. Yet, how is it some homeowners think they don't have to pay their deductible on home insurance?

Why is it some roofers claim they will "absorb", "eat", or "waive" the homeowner's deductible? First things first, that is illegal in most states, including Georgia. If you ever hear a roofing company say they can "absorb" your deductible, or they offer you a "free roof", we recommend running! Shady business practices are often a sign of poor workmanship and poor business management.

How Insurance Works!

Let's explain how insurance works, to get the big picture. When a homeowner gets an insurance policy, they are entering into a contract with the insurance company. Basically they are making regular payments, known as premiums, in return of coverage in case of loss. Insurance companies make money by insuring lots of homeowners and hoping that only a small amount of those people will actually make a claim. They want to make more on premiums, than the amount they pay out. Thus, insurance companies will determine how likely it is for a certain customer to make a claim. Then the insurance company sets premium rates accordingly. This works, but if people disrupt the model, then the insurance companies start to loose money. Insurance companies do what they can to help make premiums lower. One of the ways, is to reduce the amount that the insurance company will pay out on a claim. This is done by something called, Risk Sharing. Risk Sharing is accomplished by charging a deductible. If the customer agrees to cover part of the damages, by paying a portion of the claim, the deductible, the insurance company assumes less risk. When risk are lower so are the premiums. Deductibles also help minimize the insurance companies risk, by decreasing the chance a homeowner will file lots of small claims.

"WAIVED" Deductibles aren't legal.

Here is a little background. Up until recently, a roofer "waiving" the deductible was a common and rather acceptable practice. That's before insurance companies changed how they payout claims. In the past, when a homeowner had damage to their roof, the insurance would send out an adjuster. The adjuster would estimate the damages and then write a check to the homeowner for the total amount, minus the deductible. Example: Let's say the total damage would cost $10,000 to fix or replace the roof. The homeowner has a $1,000 deductible, the adjuster would write a check for the total amount of $9,000, right then and there. That's it, the homeowner could then do what they wanted with the $9,000. This isn't how it works today.

Today, insurance companies don't give an upfront total payment to the homeowner. Rather, they have a Replacement Cost Value. The insurance will pay for the total,minus the deductible. But not all at once. Instead, the checks will usually come in two separate payments. Example, once again, let's say the total damage would cost $10,000 to fix or replace the roof, and the homeowner has a $1,000 deductible. This leaves a claim amount paid by insurance of $9,000. Now, the adjuster will only release a portion upfront. This is known as depreciation. Depreciation is based on the age of the roof. In our current example, this first check equals only $6,000. What about the the other $3000?

How To Get The Final Check.

The remaining balance of the $9000 due from the insurance is $3000. This will be paid when and only when both of the following have occurred.

  1. The roof work is totally completed as laid out on the insurance adjusters estimate and scope.

  2. The Contractors invoice, totaling the full amount of $10,000 for the roof, is submitted to the insurance, along with a completion of work.

The insurance company will then release the second check ($3,000).

Lower Bids Can't Save You Money.

When it comes to insurance, lower bids can't save you money. If a homeowner finds a roofing company to do the work for $9,000. The homeowner will still have to pay their $1000 deductible. Here's Why: In our example, the final check is suppose to be for ($3000). Remember, the final check the insuran