Navigating the 'Perils' of Insurance

Have you ever had to deal with property theft or loss, and when you went to file your claim, you came across the term ‘perils’? Insurance perils, also known as ‘open perils’ and ‘named perils’, is simply the cause of a loss. But understanding the full scope of what an insurance peril is can help you better understand your coverage, and this can be extremely useful when choosing your coverage as well as when you need to file a claim.

As we’ve stated before, insurance perils are the cause of loss of your property. This could include:

• Fire
  
• Theft
  
• Flood
  
• Hail
  
• Hurricanes
  
• Etc
  

So why is it important to understand what your ‘perils’ are on your coverage? Coverage can be provided on an ‘all perils’/’open perils’ basis or a ‘named perils’ basis. As the name implies, ‘all perils’ coverages means that your property is covered in the case of any and all perils except for what’s listed in your policy. ‘Named perils’ means that your coverage only applies in the case of the specifically listed perils that could occur.

If you have a ‘named perils’ coverage, then that means that you’re likely operating under a more restrictive policy in terms of what your insurance would cover in the case of property damage or loss. It’s also important to note that a dwelling policy usually provides coverage for both the dwelling and its contents on a named perils basis. On the other hand, a homeowner’s policy usually provides coverage for the dwelling on an ‘all perils’ basis, while the contents would be then covered on a ‘named perils’ basis.

If your policy is a package policy, then it’s likely covered for many - but not all - perils. It will usually provide coverage for multiple perils and even extended coverages beyond the named perils. Extended coverage may include coverage for the perils of windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, vandalism, malicious mischief, theft, and breakage of glass.

When shopping for an insurance provider and the right coverage, it’s important to understand which perils you’re most likely to face. For instance, those living along the Gulf of Mexico may be at a higher risk for hurricanes than someone in the northern states of North Dakota. Separate policies may be required for those who live in areas prone to certain disasters.

Most property insurance policies exclude coverage for losses resulting from earthquakes (although they often cover losses related to fires following earthquakes), so those living in areas prone to earthquakes (such as people in California) may want to consider purchasing separate policies to ensure coverage against losses from earthquakes. Flooding is another one of those perils that typically isn’t included in insurance policies, so those who live along a body of water would likely want to consider purchasing additional flood insurance coverage as well.

Consider deductibles in addition to which perils your insurance covers too to ensure that you’ll be covered most appropriately for your location and risk factors.