What is Cosmetic Loss Exclusion? A guide for farm insurance agents
Understanding the nuances of farm insurance coverage is essential to providing the best service to your customers. One aspect that often raises questions is Cosmetic Loss Exclusion (CLE). This article will define CLE, explore current industry trends and offer actionable tips to help your farm customers better understand their coverage.
What is Cosmetic Loss Exclusion?
CLE refers to a provision in an insurance policy that excludes coverage for damage affecting only the appearance of insured property, without impacting its functionality. On a farm policy, it usually applies to insured residences and/or farm structures and can be for roofs, siding or potentially both.
For instance, if a hailstorm dents a roof but doesn’t compromise its ability to protect the building from the elements, the damage may not be covered if a CLE is applied.
Why do insurance carriers apply Cosmetic Loss Exclusions?
Most causes of cosmetic damage are weather events like wind, hail and heavy rain which are increasing in severity and frequency. The industry at large has seen a growing inclusion of CLE to property policies driven by the need to manage related claim costs.
Reducing property damage claims with CLE can help reduce the financial impact on carriers and ultimately help stabilize premiums for farm customers when damages don’t affect the farm’s ability to continue operating.
Help customers understand Cosmetic Loss Exclusion
CLE is an important aspect of farm insurance that every agent should be well-versed in. By considering these tips, you can help strengthen your client relationships and ensure they’re well-prepared for cosmetic property damage if it’s excluded from their coverage.
1. Educate on policy details
Ensure your customers understand what CLE means and how it impacts their coverage. Highlight scenarios where cosmetic damage might not be covered and provide examples relevant to their specific farm operations.
2. Customize coverage to specific needs
In some cases, you may be able to add or remove CLE. For example, if it’s crucial to maintain the aesthetic appeal of a farm dwelling or structure that’s open to the public for retail purposes, have a conversation with your underwriter to see if CLE may be removed. Conversely, a customer who voluntarily adds CLE to their policy may qualify for a discount. Work with your Farm Underwriter to explore options in these situations.
3. Promote preventative measures
Advise customers on taking preventative measures to help minimize cosmetic damage. This can include investing in durable materials, using protective coatings or implementing regular maintenance schedules. Additionally, understand what might cause cosmetic damage in their area to identify mitigation options.
4. Discuss self-insurance options proactively
Encourage customers to consider self-insuring potential cosmetic damages if their policy has a CLE. Explain the concept of self-insurance and how setting aside a fund for cosmetic repairs can provide peace of mind without significantly affecting their finances.