28 Jul What Are Perils?
Is your policy written in insurance-speak? It probably is, and we don’t blame you if you’re scratching your head wondering…
- What’s the difference between perils and risks?
- What’s a named-peril policy?
- Should I get a named-peril policy or an open-peril policy?
We totally get it! These policies can be pretty confusing, so let’s break it all down.
1. What’s the difference between a peril, risk or hazard?
- Loss: The basis of a claim for damages under the terms of an insurance policy
- Hazard: A condition that increases the likelihood of a loss occurring
- Peril: The cause of a loss
- Risk: The possibility of a loss occurring
Here’s an example: Jodi’s home is at a high risk of experiencing a loss, because her crumbling fireplace is a hazard that makes it more likely that she will experience a peril, in this case, a fire.
In the above example:
- The loss is the damages that would occur as a result of a fire.
- The hazard is the crumbling chimney.
- The peril is the fire.
- The risk is the possibility of any loss (including fires) occurring.
2. What are examples of common perils?
- Fire and smoke
- Snow, ice, or sleet
- Water damage, flooding
- Vandalism and malicious theft
- Falling objects
- Damage from a car, vehicle, or aircraft
3. Are all perils covered by my homeowners’ policy?
Unfortunately, no. A homeowner’s policy covers many different types of perils, but they don’t cover every possible peril your home may experience. Certain water damages aren’t covered. For example, water damage from a burst pipe is likely covered, but water damage from a flood would only be covered by a separate flood policy.
Another example is earthquakes. If your home experiences an earthquake, you won’t be covered for the damages without a separate earthquake policy. However, if the earthquake caused a fire, you would be likely to have coverage.
4. What’s the difference between Named-Peril Policies and Open Peril Policies?
Named-Perils Insurance Policy:
An insurance policy that only provides coverage for losses that occurred as a result of hazards or perils that are specifically named (included) on the policy.
If it’s not named, it’s not covered.
- Pro: Less Expensive
- Con: Less Coverage
- Con: The insurance company requires proof from the insured party that any damages in a claim are caused by a named peril before they provide coverage.
Open Perils Insurance Policy:
An insurance policy that provides coverage for all losses unless they occurred as a result of hazards or perils specifically excluded on the policy.
If it’s not excluded, it’s covered.
- Con: More Expensive
- Pro: More Coverage
- Pro: The insurance company has to provide coverage unless they have proof that the damage was caused by an excluded peril.
Named and Open Perils policies exist for homes and businesses. The question is, which type should you choose? In general, the best fit for most insureds is an Open Perils Insurance policy because the coverages are broad and the burden of proof falls on the company, not the policyholder. However, your agent can discuss the pros and cons and find a policy that’s the right fit for you.
Do you have more questions about perils and insurance coverage? Are you looking for a free, no-obligation quote? Give Sava Insurance Group a call, today!