'Secret' Money-Saving Home Insurance Option?

September 25, 2015

A new article at realtor.com® is warning home owners about an influx of storm-chasing contractors who may be indirectly pushing up home insurance prices in their area. These contractors may knock on home owners' doors and say they need a new roof or siding due to wind and hail damage – all cosmetic damage repairs that may not be necessary.

Home insurance companies often classify dents, dimples, and dings in roof vents, shingles, or aluminum siding as "cosmetic damage" to a property, says Billy Van Jura, an insurance broker in Poughkeepsie, N.Y.

"When several claims for this type of work are submitted in a single region, the price everyone pays (including those who haven’t filed a claim) can increase because the insurer sees the region as having greater risk of additional claims," the article at realtor.com® cautions. "There's nothing you can do about a widespread storm that damages several homes in your area and ultimately raises everyone's rates. But you can help curb your own annual home insurance costs with a little-known option called 'cosmetic damage exclusion.'"

The American Association of Insurance Services created the cosmetic damage exclusion in 2013 – available in nearly all states – that aims at protecting consumers from scammers and tries keep home insurance rates more affordable. It makes cosmetic damage coverage optional. Home owners can then decide if they want to pay for cosmetic-only wind and hail damage. If the damage impacts the safety or structural functionality of the home, the home insurance policy will kick in.

By adding this exclusion to cosmetic damage, home owners stand to save money on their annual premiums – anywhere from $100 to $200 or more, says Troy Thompson, an independent insurance broker with Pinnacle Insurance Agency in Coon Rapids, Minn.

Hail and wind damage claims alone contribute to about 40 percent of all home insurance claims in the last five years, according to the Insurance Information Institute. And many of those claims may be for minor cosmetic repairs, such as a few nicks in the siding that home owners may be made to believe are more urgent than they actually are.

Home owners may choose to submit a claim for cosmetic damage covered by their home insurance policy, but they need to be aware that they may then be responsible for paying any applicable deductibles, insurance agents say.

Source: "The Money-Saving Home Insurance Option No One Will Ever Tell You About," realtor.com® (Sept. 23, 2015)