What Is a Covered Peril in Homeowners Insurance?
Perils are adverse events that cause injury, damage or harm to a person, home or property. Most standard home insurance policies protect your home using either a Named Perils or an Open Perils approach.
Named perils policies protect your property from 16 perils named in your home insurance policy. Open perils policies protect your house and property from most perils unless the insurer excludes them from coverage.
Buying enough home insurance coverage can protect you from significant financial losses. See which types of events are covered by which types of policies.
What Is a Covered Peril in Homeowners Insurance?
A covered peril refers to an event, a situation or a natural disaster that causes injuries or damages to a person, property or belongings. When a peril causes destruction or harm, the home insurance carrier pays for any financial losses caused by the situation listed on the policy minus the deductible which you're responsible to pay.
Your insurance declarations page will list covered perils your home policy covers (or doesn't cover).
You can submit an insurance claim when a covered peril damages your property. Your home insurer will schedule an adjuster to make a home visit to assess your losses. After verifying your claim, the insurance adjuster will determine a final settlement offer, if any, from your home insurer.
16 Most Common Perils in Standard Home Insurance Policies
|Windstorms or hail||Theft|
|Fire or lightning||Riots/Civil Unrest|
|Smoke||Damages to home from vehicles|
|Falling objects||Damage caused by aircraft|
|Weight of ice, snow, sleet||Sudden or accidental damage due to short circuits|
|Freezing||Sudden or accidental tearing, cracking or bulging|
|Accidental releases or overflows of water and steam||Vandalism|
Perils Vs. Hazards in Homeowners Insurance
Hazard insurance is the same as homeowners insurance and, more precisely, it is the dwelling portion of your policy. However, a peril isn't the same thing as a hazard.
A peril is a potentially adverse event that can cause financial losses, such as a fire, windstorm or hail. Hazards are factors that make adverse events more likely, such as an open gas can that may explode or a slow leaking pipe that can cause water damage if not repaired.
What's an Exclusion in a Homeowners Insurance Policy?
Home insurance policies list perils that are excluded from coverage for certain perils, damages, acts, locations or property.
For instance, your home insurer may exclude coverage for windstorms or hail damage from your homeowners policy if you live in an area where these storms occur frequently. Your home carrier may deny coverage for natural disasters such as floods, earthquakes or mudslides. You may have to buy add-on insurance to cover these issues.
Standard home insurance typically lists exclusions on your policy's declarations page.
What's Not a Covered Peril in Homeowners Insurance Policies?
Home insurers typically exclude the following perils from coverage.
Flooding is not covered under standard homeowners insurance policies. Insurers define floods as water overflows from outside sources, sewers or drains which seep into your home. You must buy a separate National Flood Insurance Program policy or private flood insurance to receive coverage.
Earthquakes are excluded from home insurance coverage, along with earth movements, mudslides, landslides, tremors and sinkholes. To get covered for these natural disasters, you must buy a separate earthquake policy or an endorsement from a private insurer. Golden State residents can purchase earthquake coverage from the California Earthquake Authority.
Damages from infestations aren't covered under home insurance policies and exclude roaches, termites, bedbugs and other pest issues. Since this damage is preventable, home insurers won't cover these perils.
Negligence and poor maintenance issues are other areas typically not covered by home insurance policies. For instance, your home insurance company won't cover repairs for a water-damaged wall caused by a slow leak you failed to repair weeks ago.
Normal wear and tear is another issue that a home insurance company won't cover since home insurance is designed to protect a homeowner from unforeseen losses, not preventable or gradual ones.
Repairs required by ordinances or local laws are not covered under your home insurance policy. These laws mandate homeowners to tear down, repair or renovate a home under local building codes. You can buy a law ordinance endorsement to cover these compliance requirements.
How Different Types of Homeowners Insurance Policies Cover Perils
Different types of homeowners insurance policies offer varying levels of protection. One peril may be covered under one policy and not another.
HO-1 policies provide dwelling coverage for your home's physical structure. This home insurance policy doesn't provide liability, personal property, medical payments or additional living expenses (ALE) coverage.
HO-1 policies only cover ten out of 16 perils, which include:
|Fire and lightning||Vehicles|
|Windstorms and hail||Smoke|
HO-1 policies exclude coverage for perils not listed in your policy, such as earthquakes, floods and falling objects.
An HO-2 policy is a basic home insurance policy that provides dwelling and personal property coverage. Many policies also cover liability, ALE and medical expenses. HO-2 insurance protects against 16 perils; however, mortgage lenders don't accept nor recommend it and carriers rarely offer it.
An HO-3 policy is the most common home policy that customers purchase in the insurance marketplace. This standard home policy insures the dwelling, belongings, other structures on the property. HO-3 policies also offer loss of use coverage and liability protection. HO-3 homeowners insurance policies cover claims either as a named perils policy or an open perils policy.
An HO-5 policy is a high-end, comprehensive home insurance coverage. These are open peril policies, which provide broader protection for the homeowner's dwelling and property. HO-5 policies cover perils on a replacement cost basis and provide expanded limits for valuables, jewelry and electronics.
The following table explains how different home insurance policies handle covered perils.
|HO-1||Covers 10 perils||Not covered|
|HO-2||Covers named perils||Covers 16 named perils|
|HO-3||Covers open perils||Covers 16 named perils|
|HO-5||Covers open perils||Covers open perils|
Named Perils vs. Open Perils Policies
Named perils policies, or broad form policies, are less expensive, but only provide coverage for perils listed in the homeowners insurance contract. This coverage is more restrictive because a homeowner must prove that a peril listed in your home's policy caused the damage.
For instance, if high winds rip off your roof, home insurance should cover repairs if your policy covers windstorm perils. The insurance company will require you to provide evidence that high winds caused the damage and not something else. If you have an older or poorly maintained roof, your insurance carrier may argue the structure was in disrepair before the storm and refuse to cover all your damages.
Open perils policies, also called "all risks policies," are more expensive than named perils policies. However, they cover most perils, except those specifically excluded in the policy, such as floods, earthquakes or maintenance issues. Open perils policies provide better protection than named perils policies because the insurers must prove that a peril is excluded from coverage to deny the claim.
Named Peril Policy
Open Perils Policy
Covers specific risks
Covers all risks
Names covered risks
Names excluded risks
Lower monthly premium
Higher monthly premium
Covers fewer hazards
Covers more hazards
Lower settlement payouts
Higher settlement payouts
Must buy coverage for unnamed hazards
Must purchase coverage for excluded hazards
Covered Perils and Homeowners Insurance
A peril is a specific event that causes harm to a person or property. Homeowners policies cover damages either using a named peril or open peril approach. For a claim to be covered by a named peril policy, the peril must be named in the policy. Open perils cover most events, unless these situations, such as earthquakes and floods, are excluded.
If certain perils that concern you are not covered by your policy, you may want to upgrade your policy or buy add-on coverage to protect your home. Get free home insurance quotes and a consultation from SmartFinancial, which compares coverages and rates from different home insurance companies in your area to find one that matches your budget and needs. Enter your zip code below to get started.
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