It’s Only Cosmetic – Is it Covered?

Old roofIf you live in a part of the country that is frequently impacted by windstorms or hailstorms, you should be aware of a new development in home insurance policies. According to Insurance Journal, two of the companies that create insurance policies and endorsements have filed forms to exclude coverage for purely cosmetic damages to homes from home insurance policies. The standard home insurance policy doesn’t draw a distinction between cosmetic and any other type of damage and, as a result, such damages are covered. However, with the introduction of such an endorsement, the policy may exclude cosmetic damages in the future, which can result in some uncovered losses.

Before you get too worried, you should know that these endorsements are just being filed for review and have not yet been implemented. Additionally, they are endorsements that are modifications to the standard home insurance policy. Therefore, your insurance company or agent will need to point out the change in coverage as it will not be buried in the body of the policy form itself.

It does appear that these endorsements are being created because some insurers have had increased claims for damages they don’t believe affect the functionality of a home. As a result, the costly repairs are something they are seeking to minimize or eliminate through the use of these new endorsements. Currently, in a standard home insurance policy, the coverage is defined as only physical damage to or destruction of tangible property. Therefore, the definition is fairly broad and it doesn’t require the damage to affect the functionality of the tangible property. In areas where there are regular occurrences of wind and hail, the ongoing damage and repairs can become quite costly for insurers.

On the other hand, if these changes are implemented, you might want to consider that it may not be all bad if your insurer offers you an option. Instead of being an absolute, it’s possible the policies will make the coverage optional at an additional cost. Instead of simply excluding coverage for everyone, the insurers can offer you a discount to waive the cosmetic damage coverage or, if the exclusion is standard, you might be able to buy the coverage at an additional cost.

When presented to you in those terms, you should think about the real necessity of such coverage. If there is, in fact, no actual structural damage to your home other than some dents, do you really need insurance to make repairs? Would you consider not even making the repairs if they don’t affect the structural integrity of your home? It’s not unlike a small scratch on your car. Most car owners would probably not make an insurance claim for such minor damage, especially if it didn’t affect the safety of the car and wasn’t deep enough to give rise to any rust.

Before this potential change is immediately dismissed as being a negative, you might want to see how it will be implemented and what ramifications it will have for you. In the long run, if you are not troubled by the change, you might actually be able to save a little bit on insurance premiums by waiving the coverage.

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