What it means
The National Association of Insurance Commissioners, in its consumer guide to home insurance, says a homeowners policy is not a maintenance contract, and that it insures against damage from perils such as fire, wind and hail. It does not pay to repair items that simply wear out, like rotted porch railings, and the owner is responsible for upkeep, such as repairing a roof that begins to leak.
A trade article in Insurance Journal looks at how these exclusions are worded, noting that a commercial property policy and a homeowners policy both list wear and tear with items such as rust, corrosion, decay, deterioration, latent defect, settling and mechanical breakdown. The article quotes the risk management institute IRMI on what they share: the excluded perils are characterized by their predictable or expected occurrence, as the normal consequence of use of the property, or detectable and preventable with proper maintenance.
It also quotes Black's Law Dictionary, which defines wear and tear as deterioration or depreciation in value by ordinary and reasonable use, so the clauses apply to long-term damage that comes from natural use, gradually incurred through routine use. The article describes misapplications, such as a hardwood floor damaged by a guest's high heels that was first denied under the wear and tear and marring exclusions.
If damage came over years of normal wear, it is excluded, but abrupt damage is different, and in two litigated claims tiles damaged when a wine bottle and a hammer were dropped were not excluded, since the damage was sudden and not gradual. It adds that these exclusions typically apply only to the property that is itself worn.
In a leaking roof claim, the roof was worn, but the clothing damaged inside was a separate matter, and usually resulting loss is not excluded if it is otherwise covered. The NAIC guide also says actual cash value considers the home's age and wear and tear.
So wear can affect how much a claim pays, even when the cause of loss is covered, and because policy wording and state law control, a real claim needs the policy.
In practice
Real-world examples.
Example
A fictional homeowner finds that a 25-year-old roof has leaked for years. The insurer denies repair of the roof under the wear and tear exclusion. The damage built up gradually through age and use.
Example
A fictional guest drops a hammer on a ceramic tile floor and cracks a tile. The damage is sudden, not gradual. Courts in the cases described by the article did not apply the exclusion to such abrupt damage.
Example
A fictional windstorm tears shingles off an old roof. The loss is caused by a covered peril, so it is not excluded just because the roof is old. The age may still reduce the payment on an actual cash value basis.
Formula
Calculation
Actual cash value payment = replacement cost - depreciation for age and wear.
Worked example with assumed figures: a roof replacement costs $20,000 and the roof has lost 40% of its value to age and wear.
Depreciation = $20,000 x 0.40 = $8,000.
Actual cash value payment = $20,000 - $8,000 = $12,000, before any deductible.
If the policy has a $1,000 deductible, the payment is $11,000.
The figures are assumptions for illustration.Case study
Seen in the real world.
This case study is fictional and illustrative. A homeowner has a 20-year-old tile roof. A storm drops a tree branch on it and cracks several tiles. The adjuster writes that the damage appears to be from wear, tear and deterioration. The homeowner points out that the tiles cracked when the branch fell.
The cause was an abrupt covered event, not gradual use. The homeowner asks for a written explanation and the exact policy wording. The insurer reviews the claim and agrees the storm caused the damage. Because the policy pays actual cash value, the payment is reduced for the roof's age. The lesson is that wear can limit how much is paid, but a covered sudden loss is not excluded just because the property is old.
Watch out
Common mistakes.
- Assuming age alone excludes a claim, when a sudden covered event can still be paid.
- Expecting insurance to fund routine repairs, since a policy is not a maintenance contract.
- Confusing the exclusion with depreciation, when depreciation affects the amount paid and the exclusion affects whether the loss is covered.
Questions
People also ask.
What is a wear and tear exclusion?
It is a clause that removes cover for gradual deterioration from ordinary use or age. It reflects that insurance covers sudden losses, not upkeep.
Does it apply to sudden damage?
Usually not, according to the cases described in Insurance Journal. Abrupt damage, such as from a dropped object, is different from gradual wear.
Can wear still reduce a covered claim?
Yes. On an actual cash value basis, age and wear reduce the amount paid even when the cause of loss is covered.
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