If a stealthy new option on the revised standard homeowners insurance form catches on, it may soon cost you more to maintain your home's appearance.
As Insurance Journal reported last week, a revised homeowners insurance form was filed in most states in February by the American Association of Insurance Services, or AAIS, one of two organizations that design standardized forms and policies for the property and casualty, or P&C, industry.
The revised form includes a new "cosmetic damage exclusion" option that would excuse your home insurer from paying to repair cosmetic wind and hail damage to your roof, walls, doors and windows. The form also allows insurers to limit the exclusion to a single part of the dwelling, such as the roof.
Policies containing the exclusion would still pay to repair functional physical damage to the insured home, i.e., its ability to keep the weather outside.
The other P&C standards organization, ISO, also wrote a cosmetic damage exclusion into its recently revised standard commercial insurance form and is considering adding it to its new homeowners insurance form as well.
AAIS spokesman Joseph Harrington says the 330 insurance companies that use AAIS forms requested the change as a tool to help manage a recent increase in cosmetic damage claims. While some insurers may choose to apply the exclusion on a policy-by-policy basis, Harrington expects most will either apply it across the board or not use it at all.
On the surface (so to speak), the cosmetic damage exclusion seems like an ill-timed nickel-and-diming by home insurers whose pleas for rate increases have lately fallen on deaf ears at state insurance departments.
Why, a homeowner might well wonder, should I submit to a sketchy bit of hair-splitting that gives my insurance company discretion on what constitutes cosmetic damage, especially in traditionally hard-hit geographic areas like the Midwest, where this shell game is likely to be popular? And how might this potential blight affect our already-struggling property values?
Many home insurers no doubt hope that this option will become the new norm. But once homeowners get wind of it, there's a fair chance it may backfire and simply drive business to the agencies that refuse to use it.
Would you buy a policy from an insurer who couldn't care less what your home looks like?
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