Consumers all over the United States are (more and more) starting to see
"cosmetic damage endorsements" contained in their policies,
or offered by their trusted insurance brokers. Insurance agents will try
to persuade you that these cosmetic damage endorsements are "no big
deal," and do not affect any fundamental elements of your coverage.
Insurance companies are so eager to have you sign the endorsement that
they may offer a slightly lower premium in exchange for your signature. Why?
Before we answer that, let us digress. Where did the cosmetic damage waiver
come from -- decades ago, farmers and ranchers with (usually) metal buildings
and structures asked for ways to save money on their insurance premiums.
An innovative insurance company came up with the idea of a cosmetic damage
endorsement. In simple terms, the policy would say if we can call the
damage "cosmetic," we will not cover it. Farmers and ranchers
were typically looking to insure things like barns or other structures
where cosmetic dings, dents, and general surface scraping, caused by hail
or other storm related debris, mattered very little. So it made sense for them.
The waiver worked so well that insurance companies decided to apply it
to residential roofs – to save money. Lots of it. By offering a
slightly lower premium, insurance companies try to slip language into
your homeowners insurance policy that has the same language: we will not
cover damage we can call "cosmetic." Unfortunately, due to vague
definitions, and lawyer-driven fights over the phrase "cosmetic,"
insurers now use these clauses to completely deny coverage.
Imagine your car being dented by hail, but an insurer denying coverage
because it believes the damage was only "cosmetic." The insurance
company's lawyer might tell you the car still works, still performs
all its essential functions, and that they are simply living by the agreement
Your roof (with this endorsement) is not much different in the eyes of
many insurers. Just look at the picture attached to this article –
common sense tells us that when hail causes damage to your home's
roof, that's not a "cosmetic" issue – it's structural
damage that impacts the value of your home, and may ultimately lead to
further structural issues, e.g. leaks. But an insurance company in Texas
referred to the damage in this picture as "merely cosmetic."
Imagine what a future purchaser of this home would have called it!
Before signing such an endorsement, we strongly encourage our clients to
ask questions, and fully understand the impacts of the waiver. Please
call us if you, or someone you know, has questions, or is currently at
odds with an insurer over such a provision.