What is a wind and hail cosmetic damage exclusion?

What does an exclusion for wind and hail cosmetic damage mean?

A wind and hail cosmetic damage exclusion means your insurer will not pay for wind or hail damage that leaves your home functional but visibly damaged. Dented siding, scuffed window frames, and pocked shingles that do not cause leaks or compromise structural integrity are typically classified as cosmetic and denied under this exclusion. Even if the damage reduces your home's market value, the insurer is not required to pay under a policy with this exclusion in place.

The biggest problem homeowners face with this exclusion is the ambiguity of what qualifies as cosmetic. J. Robert Hunter, director of insurance for the Consumer Federation of America, notes that even cosmetic damage can reduce a home's market value: "A home with siding that's dented keeps working, but it looks terrible and will cause the home to drop in value." Hunter argues insurers should cover that loss. The exclusion shifts that financial risk entirely to the homeowner.

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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."

Joseph Harrington, director of corporate communications for the American Association of Insurance Services, 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?

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

Why do insurers add a cosmetic damage exclusion?

Insurers add a cosmetic damage exclusion to limit claim payouts on damage that does not impair a home's function, which reduces claims costs and, in theory, helps keep premiums lower for all policyholders. The American Association of Insurance Services (AAIS) notes that insurers may offer a premium credit on the wind and hail portion of the policy to compensate for the reduced coverage.

The more claims insurance companies pay, the higher rates become. That's true specifically for your rates based on claims you file, but also on a broader scale. If insurers pay a lot of cosmetic damage claims, everyone pays more.

How to find out if you have a cosmetic damage exclusion

To find a cosmetic damage exclusion in your current policy, check the declarations page under the exclusions section. If the exclusion is not clearly listed there, search the policy document for the words "cosmetic," "appearance," and "functional." Contact your insurer directly if you cannot locate the exclusions section. Before renewing or buying a new policy, ask the insurer specifically whether a cosmetic damage exclusion applies to wind and hail.

Check your declarations page for an exclusions section.
Search the full policy document for the terms "cosmetic," "appearance," and "functional."
Call your insurer directly if the exclusions section is unclear or missing.
When shopping for a new policy, ask the insurer explicitly whether a cosmetic damage exclusion applies before signing.

How does the cosmetic damage exclusion work?

The cosmetic damage exclusion works by giving your insurer the right to deny a claim if an adjuster determines the wind or hail damage affects only appearance, not function. Insurers can apply the exclusion to specific parts of the home, including roofing, windows, doors, and exterior walls, or to all of those components simultaneously. The scope of the exclusion varies by policy and is determined by the insurer when writing the policy.

The American Association of Insurance Services (AAIS) says insurers may apply a premium credit on the wind and hail portion of your policy when a cosmetic damage exclusion is added. The credit size varies by insurer and policy. As Hunter cautions, the reduced premium is unlikely to offset the full out-of-pocket cost of replacing cosmetically damaged siding or windows.

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

"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 accepting a policy with a cosmetic damage exclusion, compare the premium credit offered against the likely out-of-pocket cost of repairing or replacing cosmetically damaged siding, windows, or roofing. Hunter cautions that in most cases "the reduced premium would not be enough to offset how much it would cost to replace your siding or your windows." Ask your insurer for the specific dollar value of the credit and the coverage limits that apply before signing.

FAQ: Wind or hail cosmetic damage exclusion

Can you remove a wind or hail cosmetic exclusion from the policy?

No, insurers do not remove cosmetic damage exclusions from existing policies on request. If you want this coverage, you must shop for a new policy that does not include the exclusion. When comparing policies, ask each insurer specifically whether a cosmetic damage exclusion applies to wind and hail, and request the policy language in writing before binding coverage. Some insurers offer broader wind and hail coverage without the cosmetic exclusion, particularly in lower-risk areas.

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

No, a cosmetic damage exclusion and a wind and hail exclusion are not the same thing, though both can affect wind and hail claims. A cosmetic damage exclusion limits coverage to functional damage only, meaning your insurer can still cover wind and hail damage that impairs your home's performance. A wind and hail exclusion eliminates coverage for all wind and hail damage entirely, which is typically applied in high-risk areas such as coastal regions and Tornado Alley states.

If wind and hail damage are excluded from your policy, you will need a separate windstorm and hail policy.