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Ugly home insurance development

By Jay MacDonald ·
Tuesday, March 12, 2013
Posted: 6 am ET

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?

Follow me on Twitter: @omnisaurus

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March 13, 2013 at 5:08 pm

What really raises my ire concerning insurance increases is when their response is that rates are increasing due to national catastrophes. I was told that across the board, no exceptions my home owners would increase by $290.00. I've never made a claim in over 28 years of homeownership, have been insured with the same carrier, do not live in a flood zone, nor hurricane or tornado prone region. Our house is in impeccable shape, have all safety requirements met and also have an umbrella policy. In other words we are insured to the max. Funny how we have to share the risk with others who live by the sea(by their own choosing, I would say) yet don't get to share in the pleasures they enjoy on a daily basis!

March 13, 2013 at 4:57 pm

Lenders can make an impact here if they will just refuse to accept these insurance policies. Then, we need an insurer to setp forward and do the right thing....and get the bulk of the business. Shame on these guys!

rafael salas
March 13, 2013 at 4:54 pm


March 13, 2013 at 4:06 pm

Insurance is a big scam. I have Guaranteed replacement coverage on my policy which is no longer offered. Consequently they raise my rates $200 a year telling me it is due to other claims.
I figure they are trying to price me out of this policy. The new replacement policy they offer only guarantees 125% of covered value and doesn't even cover door hardware if someone breaks in and destroys the handle on the door.

Lynne Palmer
March 13, 2013 at 2:43 pm

Why at such a terrible time in our economy would they want to do something like this? The federal government just went through a huge cut in hours and in most cases down to 4 day work weeks. Not to mention the existing Unemployment Rate. We all know what kind of domino effect this causes. Straight down to small business and real estate. All this is going to do is tick people off. If I hear my insurance company takes on this form, I will go to a company that does not use it. People already have such a poor attitude toward insurance companies and banks. Ask anyone what two bills they hate paying and the reasons why. Insurance will most likely be one because there is a lack of trust. Most already believe they are getting ripped off and pay more than they should. The fact so many, until the last few years did not know flood insurance did not come with the policy and is an add on helped add to the mistrust. That flood insurance earthquake, etc is an add on. So, go ahead and add another add on to insurance raising rates or simply use the new forms and see what will happen. Consumers do not like big bullies taking things they feel should be common sense in an insurance policy. What happens to how the exterior of the home will look when not repaired and what it will do to the values is something consumers know big insurance companies could care less about. Someone came up with this idea and I have to say it really does look like all you people do care about and want is to profit from others misfortunes.

Walter L Lockhart
March 13, 2013 at 11:23 am

Just what does "cosmetic damage" refer to in "Insurance Terms" ?

Walter L Lockhart
March 13, 2013 at 11:20 am

What does "cosmetic damage" refer to?

Walter L Lockhart
March 13, 2013 at 11:16 am

Just what does "cosmetic damage" refer to?

March 13, 2013 at 11:14 am

Insurance is supposed to protect you from loss of property value also. Insurance companys are the ones that want to sell replacement value insurance. If they are going to offer the product then they should be prepared to pay the claims. They charge a lot of money for a low deductable policy

March 13, 2013 at 10:59 am

People - be informed consumers and read your policies- before something happens or before you purchase. Shop around. If you don't like the coverage/price - go elsewhere. Everything can't possibly be covered. People need to understand that. (and the previous comment about a broken window not being covered? That wouldn't be cosmetic as it would not keep the weather out.)You may not like paying for homeowner's insurance - but compare that to having no coverage at all.