I was talking with a person the other week about home insurance. They asked whether the policy I had proposed was a named peril or all risk, or open peril, policy. It’s an excellent question and one we should delve into to expand on last week’s post, The Three Home Insurance Form Types (see https://wiseinsurancegroup.com/three-home-insurance-form-types/).
One of the categories Texas home insurance policies fall into are all risk and named peril policies. Insurance companies refer to perils as a specific type of exposure to injury or loss or destruction. In other words, your home insurance policy protects against loss from a variety of perils or specific types of losses.
Named Perils: A named perils policy actually provides a list of the perils that the policy covers. Named peril policies are written from the perspective of what they cover and under what conditions it’s covered. The covered perils may include some or all of the following:
- Fire or lightening
- Smoke damage
- Riot or civil commotion
- Aircraft
- Falling objects
- Vehicles
- Vandalism and malicious mischief
- Sudden and accidental discharge of water or steam
- Freezing of plumbing
- Collapse
- Weight of ice, sleet of snow
- Windstorm or hail
In the case of a named perils policy, the only damage that’s covered in a claim must be caused by one of the named perils. Damage caused by something other than one of the listed perils is not covered. Depending on the carrier, options may be added or endorsed to the policy to provide coverage for other perils such as slow leak or continuous seepage coverage, replacement cost of contents, etc.
All Risk: An all risk or open perils policy doesn’t provide a list of the perils covered. They cover anything unless it’s specifically excluded, so the policy usually contains a list of all of the items or perils that aren’t covered. Items that are excluded may include some or all of the following:
- War
- Earthquake
- Damage from insects or rodents
- Pollution
- Flood
- Damage from deterioration
Most of these items are also not included in named perils policies. The key to knowing what is and what isn’t covered is to read the policy’s exclusions.
All HOA policies are named perils policies. HO-3 policies may be written as either named peril or all risk policies. Some companies offer both types depending on the package selected. HOB policies are usually all risk, although some are all risk on the home and named perils on the contents.
Which home insurance policy is right for you? There are good options with both policies. It really depends on what you specifically want covered and what you’re willing to live without. In many cases, a properly endorsed named perils policy will end up covering most to everything an all risk policy covers.
A good agent will explain what is and what isn’t covered so don’t be afraid to ask questions. Share your questions, comments, or experiences with me on my Facebook, Google +, or LinkedIn pages. I’d love to hear from you!
