Recently, we’ve seen more mortgage applications delayed due to homeowner insurance issues—especially those related to roof coverage.
Here’s what’s happening:
Many insurance companies now limit roof claims based on the roof’s age.
While they still cover catastrophic losses like fire or wind damage, when it comes to roof repairs, they may only pay based on the Actual Cash Value (ACV)—the depreciated value of your roof—instead of the Replacement Cost (the full repair or replacement cost).
Why It Matters
Take a 15-year-old home as an example: if the roof is damaged by a storm and your policy only covers ACV, the insurer might say:
“Your roof is 15 years old, so we’ll only cover half the cost.”
That means the homeowner could be left paying thousands of dollars out of pocket.
With Replacement Cost Coverage, however, the insurer must pay the full cost to repair or replace the roof (minus your deductible). The difference in protection is significant.
Loan Requirements
Mortgage investors like Fannie Mae clearly state:
Any insurance policy that includes depreciation, limitation, or reduced coverage clauses—whether for the roof or any part of the property—does not meet loan requirements.
In other words, a homeowner’s policy that only covers ACV for the roof will likely fail loan underwriting.
What You Can Do
If you face this issue, there are two possible solutions:
- Switch insurance providers — Find a company willing to offer Replacement Cost Coverage even for older roofs.
- Add separate roof coverage — Purchase an additional policy to ensure the roof meets loan standards.
A Reminder for Agents and Homeowners
Insurance companies are increasingly using coverage limits to manage their risks, so these cases are becoming more common.
- Listing agents: Encourage sellers to review their insurance terms before listing to avoid surprises during escrow.
- Buyer’s agents: Remind clients that older roofs may trigger insurance or loan approval challenges.
Bottom Line
An aging roof isn’t necessarily a dealbreaker—but insufficient insurance coverage can stall your mortgage approval. Check early and prepare ahead to avoid last-minute delays.