Have you heard of cosmetic damage exclusion? Imagine you live in a state that is prone to hail. You do the prudent thing and get an insurance policy that covers your home for hail damage. But before you do, you do a little research. You look into the insurance companies that are nationwide, have a track record in your state, and have good reviews. However, you miss one thing in the fine print – the cosmetic damage exclusion. Or maybe, if you got your policy before 2013, your insurance company added it on without you ever realizing.
Welcome to the insurance world post-Katrina. After realizing the extent to which they would be liable after Katrina, many insurance companies adopted a “cosmetic damage exclusion”. The purpose of American Association of Insurance Services (AAIS) was to “limit insurers losses when severe weather resulted in many expensive damage claims by homeowners and other property owners.”
What a cosmetic damage exclusion essentially gave insurance companies was an out policy. In other words, a way to exclude payments for damage to exterior surfaces, including walls, roofs, doors, and windows from hail or wind if the storm impacts the appearance but not the function of these elements. That’s an important point – the “appearance but not the function”.
J. Robert Hunter, director of insurance for the Consumer Federation of America says
It’s a very gray area. His recommendation: find out exactly what the insurance company thinks is cosmetic versus functional hail and wind damage.
While insurance companies argue the exclusions are necessary to avoid raising insurance premiums to all homeowners, and have even gone as far as compensating homeowners for the lack of cosmetic storm damage coverage by giving them a credit that reduces premiums on the policy’s hail and wind damage portion, Hunter contends that it is simply a lawsuit waiting to happen.
He says, “A home with siding that’s dented keeps working. Although, it looks terrible and will cause the home to drop in value. Insurance companies should make it whole, even if the home still functions.”
For many homeowners
The idea of insurance is to make whole what is damaged. And parsing out what is cosmetic damage from what is functional damage, for many in the roofing restoration and home repair business is a moot point. Siding, walls and shingles are meant to protect a home. Moreover, any damage to them could arguably lead to decreased function. As well as, and in many cases further damage down the road.
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