This paper reports on the application of a special purpose finite element analysis tool that combines augmented finite element methodologies (AFEM) and cohesive zone model (CZM) methods to simulate initiation and propagation of both cohesive and adhesive cracks. The constitutive behaviour of an aluminium/silicon carbide metal matrix composite was predicted and compared with experimental data as an example of a material system controlled by cohesive cracks. The simulation allowed to determine the strain level, at which particle fracture was initiated and illustrates how the overall material response is dominated by particle fracture beyond that strain level. The effects of silica filler particles on the lifetime of polyurethane matrix aircraft coating systems were investigated in a second example in which adhesive cracks at the filler/matrix interface are a dominant failure mechanism. The influence of particle volume fraction and particle/matrix interface adhesion strength on coating lifetime predictions were investigated and the results show that low filler particle volume fraction and high interface adhesion strength improve coating durability. In general, the paper demonstrates the potential of combined AFEM and CZM micromechanical damage simulation to gain improved understanding of damage mechanisms in heterogeneous materials and to support analysis and design of advanced material systems.