Insulated rail joints (IRJs), safety critical components of railway track, are used to locate trains and broken rails using electrical signalling systems. The bending rigidity of the rail at an IRJ is only 2/3(rds) as that of continuous rail. As a result, stress singularity problems occur at IRJs which therefore degrade faster compared to the continuous rail. Both railhead top surface and subsurface damage occurs and accelerates the initiation of cracks. Head hardened rails are used to overcome these problems. A thorough study addresses the damage pattern in the railhead sub-surface using a 3D finite element analysis (FEA) employing vertical wheel loadings considering three endpost materials: fibre glass (fb), nylon 66 (ny) and polytetrafluoroethylene (ptfe). A new damage parameter, the vertical residual stress component, is proposed to assess new patterns of railhead damage considering plastic deformation. To rank the influential stress related damage parameters, two other parameters are also considered, namely residual von-Mises and longitudinal stress components. Of these, the residual von-Mises stress component is more prominent with regard to the top surface and sub-surface damage, whereas the longitudinal stress component is responsible for top surface material damage. From these damage patterns, a progressive change in the hardness distribution of railhead material can evolve.