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Cosmetic damage exclusions may not cover certain damages the insurer considers cosmetic or superficial in nature. Find out if your policy covers cosmetic damages.

New cosmetic exclusion for wind and hail damage

If you live in an area prone to hail storms and strong winds, watch out: Your home insurance policy may offer less protection than you think, especially for cosmetic damages. Does your homeowners insurance policy include a cosmetic damage exclusion?

Even if your homeowners policy covers wind and hail damage, if there is a cosmetic damage exclusion, it may only cover those not considered cosmetic damages.

But let's face it. When it comes to our homes, often our most significant financial investments, looks matter. Things like hail dented roofs or siding can impact the perception of value, influencing selling ability and market value. So, how can you find out if your homeowners insurance policy covers cosmetic damages, and what can you do about it? Read on. We've got you covered.

KEY TAKEAWAYS
  • Some home insurance policies don't cover cosmetic hail and wind damage.
  • The severity of storms in recent years resulted in insurance companies starting this exclusion. If you have it on your policy, have your insurer explain what constitutes cosmetic damage.
  • For the lack of coverage for cosmetic storm damage, insurance companies may give you a credit to reduce your premium on the hail and wind damage portion of your policy.
  • Hail and wind exclusions is different than wind and hail deductibles that are normal in hurricane-prone areas.

What is cosmetic damage, and what is a cosmetic damage exclusion?

J. Robert Hunter, director of insurance for the Consumer Federation of America in Washington, D.C., says the big problem for homeowners is determining what constitutes cosmetic damage.

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"A home with siding that's dented keeps working, but it looks terrible and will cause the home to drop in value," says Hunter. "Insurance companies should make it whole, even if the home still functions. This is a lawsuit waiting to happen because of the ambiguous definition of cosmetic damage."

Harrington says home insurance policies insure the property for physical damage, not their economic value.

"Of course, home insurance can't pay if a home drops in value because of the economy," says Hunter, "but if it drops in value because of physical damage, then it should be covered."

Hunter says consumers need to compare policies and premiums before choosing a home insurance company. (See: "New homeowner insurance basics.")

What is a cosmetic roof exclusion?

A cosmetic damage exclusion means damage to exterior surfaces, including walls, roofs, doors, and windows that impact the appearance but not the function of these elements, may not be covered. These are things insurers consider superficial or cosmetic and are usually caused by perils like wind or hail.

Because roofs are often the target of this type of damage, some may refer to the exclusion as a cosmetic roof exclusion. In other cases, insurance companies have separated roofing from different areas of the home by designating the exclusion to the roof only.

How to find out if you have a cosmetic damage exclusion

Without a doubt, the best thing to do is to inquire about exclusions before you sign up for a policy. Doing your homework before you decide on an insurance company and policy allows you to look at other options by shopping around with some of the best home insurance companies.

However, if you've already got a policy and are reading this, wondering if it contains a cosmetic damage exclusion, you should review the declaration page of your policy after the main coverages. Then, if you take a look and still aren't sure, contact your insurance agent to verify.

How does the cosmetic damage exclusion work?

Home insurance companies can decide whether to exclude cosmetic damage on roofing, windows and doors and exterior walls or some combination of those elements. Insurers may also choose to offer the exclusion on a case-by-case basis, says Harrington.

AAIS says insurance companies give you a credit to reduce your premium on the hail and wind damage portion of your policy to compensate you for the lack of coverage for cosmetic storm damage.

But credit or not, when it comes to homes, looks matter.

In a 2021 lawsuit over a denied claim for metal roof damage, major insurer State Farm defined cosmetic loss as "a loss that alters the physical appearance of the metal roof covering but does not result in the penetration of water through the metal roof covering." In that case, the court ruled in favor of State Farm due to the cosmetic damage endorsement in the home insurance policy.

"I can't say how much anyone would save on their particular insurance premium, but the credit applies only to the fraction of the premium that pays for hail and wind damage," says Harrington.

"Before you decide to accept a policy with a cosmetic damage exclusion, you need to see if the premium reduction is worth it," says Hunter. "It's doubtful that the reduced premium would be enough to offset how much it would cost to replace your siding or your windows if the insurance company says the damage is just cosmetic."

Is the cosmetic damage exclusion the same as the wind and hail exclusion?

While these exclusions are related because most cosmetic damage results from wind and hail, they are not the same.

Insurance companies in most states cover wind and hail damage that interferes with the functionality of the property. But if you live in one of the high-risk areas, your insurance company may have a wind and hail damage endorsement. This allows them to deny coverage for wind and hail-related damages unless you have a separate windstorm and hail policy. That separate policy will also have a separate wind/hail deductible that will range from 1% to 5% of the home's insured value.

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