If you live in an area prone to hail storms and strong winds, watch out: Your new home insurance policy may offer less protection than in the past. Most standard home insurance policies currently cover storm damage from wind and hail, but that may be changing soon for some new homeowners. The American Association of Insurance Services (AAIS), an organization that develops policy forms used by more than 700 property and casualty insurance companies, recently created a "Cosmetic Damage Exclusion" for home insurance policies. (See: " Alphabet soup: 6 home insurance policies and what they cover.") The hail and wind exclusion, which insurance companies can choose to adopt or not, excludes payments for damage to exterior surfaces including walls, roofs, doors and windows from hail or wind if the storm impacts the appearance but not the function of these elements. "Property and casualty insurance companies, especially smaller regional companies that insure homes in areas prone to storms, have been hit hard by storm losses over the past decade," says Joseph Harrington, director of corporate communications for the American Association of Insurance Services (AAIS) in Wheaton, Ill. Since 2008, U.S. insurers have paid 4.5 million hail claims totaling $32.1 billion, according to Verisk Underwriting. "We came up with this exclusion as an alternative to insurance companies raising rates on everyone," says Harrington. In addition to the severity of storms in recent years, Harrington says that more sophisticated tools have been used by some companies to help homeowners file insurance claims after a storm. "These tools can detect microscopic damage to a home from hail or wind, but often that damage won't impact the ability of the roof or windows to keep working," says Harrington. The exclusion wouldn't apply if there was any functional loss to the property, even if some of the damage was purely cosmetic, he says.
"No one would have to decide whether something is functional damage or only cosmetic because the insurance would cover all the damage if the roof leaked or something like that," says Harrington.