What Is a Peril in Homeowners Insurance?
Homeowners insurance protects your home and your personal belongings if they get damaged by certain events. These damaging events are also known as perils and without insurance, you have to pay out-of-pocket to repair the damages caused by perils.
Your insurance policy protects you in many situations you might experience as a homeowner. However, it doesn’t cover everything. If you’re a homeowner, it’s important to understand what a peril is and what perils your policy does and does not cover.
What is the definition of a peril?
A peril is a term that is specific to insurance and refers to any event that causes damage or destruction to your home or belongings. Perils include things like fire damage, wind damage and theft, all of which are usually covered by your insurance policy. However, a peril also refers to things like water damage (which is only covered sometimes, depending on the circumstances) and neglect (which is never covered). In short, most insurance companies offer coverage for a common list of perils but depending on where you live your home may be more susceptible to certain perils, so it’s important to know what your policy covers.
What are covered perils?
You can find a specific list of the perils your home insurance covers in your policy. Typically, the perils that your home insurance policy covers include:
- Fire and smoke
- Windstorms and hail
- Damage from a plane or car
- Falling objects
- Weight of ice, snow or sleet
- Water damage (depending on the circumstances)
- Accidental discharge of water or steam
- Cacking or bulging in water or air systems
- Damage from an electrical current
- Volcanic eruptions
It’s also important to know what perils your insurance does not cover. Every insurance company has a specific list of events that are not covered, although some common ones are:
- General wear and tear
- Maintenance issues
- Pet or animal damage
- Insects or pests
The most common disasters you might endure as a homeowner are probably covered. According to the Insurance Information Institute (III), wind and hail damage was the most frequent cause of home insurance claims between 2013-2017. The second most common was water and freezing-related damage. However, homeowners in certain areas may be more prone to damage from fire or high winds.
Keep in mind that earthquake and flood coverage both require a separate policy. If you live in an area that is prone to either, getting this type of insurance is a smart investment. You can purchase earthquake insurance from your home insurance provider as an add-on policy. Flood insurance is offered through the National Flood Insurance Program.
The difference between named perils vs. open perils
Not all home insurance policies are the same. In fact, there are several different types of home insurance policies: HO-2, HO-3, HO-4 and HO-5 policies. An HO-4 policy is the same as renters insurance. If you’re not sure what type of policy you have, HO-3 policies are the most common because they cover the minimum coverage required by mortgage lenders.
”The type of policy you have directly affects what your insurance covers. You are either covered under a named perils policy or an open perils policy. With a named perils policy, you’re covered only in a specific list of situations written in your insurance policy. With an open perils policy, you are covered in any event that is not explicitly excluded from your policy.
Here is a breakdown of the different types of insurance policies, and what kind of coverage they offer for the physical structure of your home and your personal belongings.
|HO-2||Named perils||Named perils|
|HO-3||Open perils||Named perils|
|HO-4 (Renters insurance)||Neither||Named perils|
|HO-5||Open perils||Open perils|
Where do you find perils on your policy?
If you’re not sure what perils your policy covers, you can consult your insurance policy. On the declaration page, it will state whether you are covered by a named perils policy or an open perils policy. However, you won’t find the list of covered perils on the declaration page. You’ll need to read the policy contract wording for a list of covered perils, or excluded perils, depending on the type of policy you have. If you don’t have a copy of your policy on hand, you can call the insurance company or your agent to find out.