An insurance peril is an unexpected event that causes damage or loss to your home or belongings, such as fire, lightning, wind, theft and vandalism. In homeowners insurance, there are covered perils, meaning the type of damage or loss is covered by the insurance policy; and there's perils that are NOT covered, which are referred to as "insurance exclusions".
For example, a typical homeowners policy will generally provide coverage for damage caused by fire, wind, hail and several others, but most policies won't cover damage due to flooding, earthquakes, normal wear and tear, or neglect and poor maintenance.
Named Peril vs. Open Peril
Depending on how your comprehensive or limited your homeowners insurance policy is, your home or belongings will either be covered on a named peril or open peril basis.
"Named perils coverage" means your policy only covers specific or named perils listed in your policy. If you file a claim, the damage must result from a listed covered peril in the policy. This type of policy limits the number of events or types of damage your insurance may cover. Coverage for personal belongings is generally provided on a named peril basis.
"Open perils coverage", also referred to as "all risks coverage," means you would have coverage against a peril unless your policy specifically excludes the loss. While you'll typically pay more for a home insurance policy with open perils coverage, this coverage is usually standard for your dwelling coverage.
Examples of Covered Perils in Homeowners Insurance:
The following perils are typically covered in a standard homeowners insurance policy. This means, that if one of the following causes damage or loss to your home or personal property, you can submit a claim for coverage with your insurance company. It's important to remember that not all policies are created equal and different companies have different exclusions and limits. Talk with your agent for specifics about your policy.
Examples of Perils NOT Covered by Homeowners Insurance:
Homeowners policies typically contain a list of exclusions, which are perils and circumstances not covered by the policy. Below are some examples of perils that are usually not covered by homeowners insurance policies. It is crucial to thoroughly review and understand these exclusions in your policy.
Most standard home insurance policies won't cover water damage caused by flooding. Additionally, water damage caused by sewer backups or seepage are usually excluded from coverage. To cover your home and belongings from flooding, you would need a separate flood insurance policy.
Damage caused by earth movement, meaning earthquakes, tremors, landslides, mudslides, subsidence, and sinkholes are not covered by most standard policies. Coverage may be available with some companies by an endorsement or optional coverage add on.
Normal wear and tear or lack of maintenance
Homeowners insurance usually won't cover damage caused by neglect or poor maintenance. This also applies to internal water damage, so if your home has a mold problem, or an exposed pipe that leaked over the course of months and caused extensive water damage, you likely won't be covered.
Pests or Vermin
Damage caused by pests are also excluded from coverage. These pests can include rodents, termites, bed bugs, and birds to name a few. Home insurance typically won't pay for pest removal either.
Ordinance or Law
Your standard policy won't cover losses associated with the government's enforcement of local building codes. Meaning, if the government requires you to repair, demolish, renovate, or even remodel your home to meet local building ordinances, insurance won't help cover the costs. Most companies allow you to buy an optional endorsement typically referred to as ordinance or law coverage, but this coverage only will help in situations where your house was damaged by a covered peril and is subject to policy limits.
A few more to keep on your radar
This information is intended to give you some insight into what a peril is, how they work with homeowners insurance and some of the things to keep an eye out for. The best place to find a full list of exclusions and specific coverage details is in your actual homeowners insurance policy. When working with your agent, be sure to ask questions and seek to understand how your policy works. Also, remember that some companies offer optional coverage add-ons or endorsements which can be added to safeguard your home and property against types of loss not covered by the standard policy.