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When it comes to homeowners insurance, your policy can include coverage for a variety of losses. These losses are called home insurance perils, and depending on your policy, certain homeowners insurance perils may or may not be covered. All homeowners insurance policies include information on the covered and excluded perils.
That said, there are some common home insurance perils that most carriers cover. And, depending on the carrier, there are typically unique perils that may not be covered. For example, one carrier may provide coverage for windstorms as part of a standard homeowners policy, while other carriers may only cover windstorm damage if you have a special endorsement for it. Understanding home insurance perils and how they are viewed by insurance companies can help you when shopping and comparing quotes for homeowners insurance coverage.
Who is most affected by a home insurance peril?
Homeowners are most affected by perils, as damage to their homes can disrupt daily lives and impact the financial interest in the property they own. Imagine a common peril in your area, such as tornadoes, which can cause significant damage. If a tornado hits your town and causes damage to your rooftop, the peril affects you (as the homeowner) the most.
Financially, your mortgage lender might also be indirectly at-risk by home insurance perils as unrepaired damage to the structure would impact the property’s market value. Lastly, the property insurer insuring the home could be affected by perils, as they are likely responsible for paying the majority of repair costs for the home.
However, not all types of perils in insurance affect every homeowner. Hurricanes mostly occur on the southeast and east coasts. Wildfires are a common peril in western and southwestern states. Understanding the common perils in your area can help you choose appropriate coverage options. Checking your insurance policy to confirm what perils are included may help you identify gaps in your coverage, giving you the chance to correct them if you are at risk for a loss.
Types of home insurance perils
Home insurance policies cover your home and belongings in a few ways, so you don’t have to manually choose which perils you want covered by insurance. These options are generally referred to as named peril and all peril or open peril coverage.
Keep in mind that these coverage options apply to your dwelling coverage and your personal property coverage. Homeowners policy types, such as HO-2, HO-3 or HO-5, determine whether or not your policy is based on named versus open-perils. Generally, perils are covered as:
- HO-2: Named perils for dwelling coverage and personal property coverage
- HO-3: Open perils for dwelling coverage and named perils for personal property coverage
- HO-5: Open perils for dwelling coverage and personal property coverage
The policy form you choose affects your cost of homeowners insurance since insurers price premiums based on the level of risk they assume. Talk with your homeowners insurance agent if you need clarification on how your policy would respond to a covered claim or to verify if you are properly covered.
A named-peril means that the covered losses are specifically named in the insurance policy paperwork. Only the named losses — the “named perils” — are covered. In insurance language, this means that you, as the policyholder, are responsible for showing that a given loss should be covered by demonstrating that a covered peril caused the damage.
Named peril coverage can apply to your dwelling and personal property coverage, depending on what policy form you have. The most common policy form, HO-3 policies, usually cover personal property losses under named peril coverage.
All-peril home insurance coverage, also called “open perils” or “all-risk” coverage, means that your property insurer covers any peril not specifically excluded in your policy. This means that, rather than you having to prove something should be covered, an insurance company has to prove that the loss is not covered. All-peril policies shift the burden of proof to the insurance company.
HO-3 home insurance policies cover your dwelling and other structures on your property under open perils coverage. HO-5 policies cover both your home and personal property for open perils. The name can be slightly misleading, though; open peril policies don’t cover every single type of loss. Be sure to read your policy carefully to know what is excluded.
What are some commonly excluded perils?
Even if you have all-perils coverage on your homeowners policy, there are some situations and events not covered and would need to be added as an endorsement on your homeowners policy or purchased as a separate policy. Perils typically excluded by your standard property insurance include:
What are the differences between peril, risk and hazard?
A peril, risk and hazard are all related. A peril is the actual event that causes damage and loss, such as a fire. A risk is the likelihood of a peril happening. A hazard increases the chances of the peril. For example, dead foliage and dry brush in your backyard could be a hazard that could cause a fire (peril). Certain areas of California have a higher risk for fire than coastal zones in Florida.