An insurance plan can help you pay for property damage and loss, but in many cases, it doesn'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 the dotted line. In fact, you may review your policy and determine you need additional coverage to best protect your assets.
Understanding 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.
Reviewing 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.
Evaluating 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.
Purchasing 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.
- U.S. Legal: Peril Law and Legal Definition
- Progressive: Home Insurance Policies
- Andrew G. Gordon Insurance: Open Perils vs Named Perils
- Allstate: What Is Comprehensive Insurance?
- Maine Bureau of Insurance: A Consumer’s Guide to Homeowners Insurance
- NC Department of Insurance. "A Consumer's Guide to Homeowner's Insurance," Page 2. Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "What Is Homeowner's Insurance? Why Is Homeowner's Insurance Required?" Accessed July 9, 2020.
- NC Department of Insurance. "A Consumer's Guide to Homeowner's Insurance," Page 3. Accessed July 9, 2020.
- USA.gov. "Property Insurance: Homeowners and Renters Insurance." Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "Shop For Homeowner's Insurance." July 9, 2020.
- Virginia State Corporation Commission Bureau of Insurance. "Homeowners Insurance Consumer's Guide," Pages 4-5." Accessed July 9, 2020.
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.