Basic Perils of Insurance

by Gregory Hamel
Floods aren't covered by standard homeowners insurance.

An insurance plan can help you pay for property damage and loss, but it won't cover everything. In property insurance, a peril refers a specific cause of property damage or loss, such as a fire, storm or flood. The perils covered by insurance vary from one policy to another, so it is important to read the terms of a plan carefully before signing on.

Basic Perils

The concept of insurance perils most often arises in the context of homeowners insurance. Homeowners insurance typically covers several basic perils at the bare minimum, including fires, lightning, hail, wind damage, explosions, riots, smoke, theft, vandalism and damage caused by aircraft or vehicles. Comprehensive car insurance, which describes optional auto insurance for damage caused by events other than traffic accidents, usually provides compensation for specific perils like fire, theft, vandalism, fallen trees and damage caused by animals.

Named vs. Open Perils

A homeowners insurance plan can be either a named or open peril plan. With a named peril plan, you only have coverage for the perils specifically listed in the plan. Under an open plan, you are covered against all perils except those that are explicitly excluded by the plan. In general, open plans provide coverage against a broader range of perils, but they are also likely to cost a bit more than named peril plans.

Coverage Levels

Homeowners insurance is divided into different coverage levels that determine the types of perils they cover. HO 1 plans are named peril plans that only cover basic perils. HO 2 plans cover a broader range of perils, including things like fallen objects, damage caused by faulty appliances and frozen pipes. HO 3 plans the most popular because they are open peril plans, so they cover many perils not covered by HO1 and HO2 plans.

Extra Insurance

Even if you have an HO 3 plan, it likely does not cover certain perils like earthquakes, floods and landslides. If you live in an area that is prone to perils not covered by standard insurance plans, you may be able to add extra insurance to your homeowners plan to get the protection you need. Floods are usually not covered by homeowners insurance at all, but you can buy a separate flood insurance policy to protect against flood damage.

About the Author

Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.

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