Cosmetic Damage Endorsements: Don't Be Fooled

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 you signed.

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.