In the realm of homeowners insurance, understanding the concept of peril is crucial. A peril refers to an event or circumstance that causes damage or destruction to your home or belongings. Homeowners insurance policies provide coverage for certain perils, protecting you financially in case of unexpected incidents.
To better understand what perils in homeowners insurance are, let’s take a closer look at the different types of home insurance perils, which are typically covered and not covered, and some real-life examples of perils.
Types of home insurance perils
Home insurance companies categorize perils into two main types: named perils and all-risk perils. This is how these two perils differ:
1. Named perils
Named perils, also known as specified perils, are specific events or risks that are explicitly listed in your insurance policy. Usually, homeowners insurance policies cover 16 different types of perils. These perils typically include common occurrences such as fire, lightning, theft, vandalism, windstorm, and certain types of water damage. If your policy mentions a peril by name, you have coverage for it. Otherwise, you'll need additional coverage.
2. All-Risk perils
All-risk perils, also referred to as open perils, provide broader coverage than a named peril policy. Instead of listing individual perils, an all-risk policy covers any damage or loss to your home and belongings, except for those explicitly excluded in the policy language. While all-risk policies offer more extensive coverage, they tend to be costlier than named peril policies.
What perils are covered in homeowners insurance?
Standard homeowners insurance policies typically cover a range of perils, offering protection and peace of mind to homeowners. The 16 common perils covered by most policies include:
- Fire and lightning: Coverage for damages caused by fire, whether due to accidental ignition or intentional events. Protection against damages resulting from lightning strikes to your home or property is also covered.
- Windstorm or hail: Coverage for damages caused by strong winds or hailstorms, such as roof damage or broken windows.
- Explosion: Protection in case of explosions that cause damage to your home or belongings.
- Smoke and ash: Coverage for damages caused by smoke, such as from a fire in a neighboring property.
- Theft: Reimbursement for stolen belongings or damages resulting from a break-in.
- Vandalism or malicious mischief: Coverage for damages caused by acts of vandalism or malicious intent not caused by the homeowner.
- Riot or civil commotion: Protection in case of damages resulting from riots, civil disturbances, or related events.
- Aircraft damage: Coverage for damages caused by aircraft crashes with your property.
- Vehicle damage: Damage caused by cars is also covered.
- Volcanic eruption: Protection against damages caused by volcanic eruptions, such as ash or lava flow.
- Falling objects: Coverage for damages caused by objects falling onto your property, like trees or debris.
- Weight of ice, snow, or sleet: Protection against damages caused by the excessive weight of ice, snow, or sleet on your home's structure.
- Accidental discharge or overflow of water or steam: Coverage for damages caused by sudden and accidental water or steam discharge, such as burst pipes or appliance leaks.
- Sudden and accidental tearing apart, cracking, burning, or bulging of plumbing: This peril protects against sudden damages to essential systems like plumbing, heating, and AC systems, in your home.
- Freezing of household systems: Coverage for damages resulting from frozen plumbing or other critical systems.
- Electrical damage to appliances: Protection against damages caused by electrical issues that affect your appliances or electronics.
Keep in mind that the extent of coverage for each peril may vary depending on your specific policy and any additional endorsements you might have. It's essential to review your insurance contract thoroughly to understand the scope of coverage and any exclusions that apply to your named perils policy.
What perils are not covered in homeowners insurance?
Just as important as it is to understand what your homeowners insurance policy covers, it is essential to be aware of the perils that are commonly excluded from standard homeowners insurance policies. Some of the perils not covered include:
- Floods: Homeowners insurance usually does not cover flood-related damage. For this protection, you need to purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer.
- Earthquakes: Similar to floods, earthquakes are typically not included in standard policies. Residents in earthquake-prone areas may need to acquire separate earthquake insurance.
- Sinkholes: Sinkhole damage is often excluded from homeowners insurance, but certain states with prevalent sinkhole risks may offer additional coverage.
- Mold and pest infestations: Damage from mold and pest infestations is generally not covered, as insurance providers believe these issues are preventable with regular maintenance.
Peril vs. hazard vs. risk
It’s very easy to mix up terms like peril, hazard, and risk. To better understand your homeowners insurance policy, it’s helpful to understand these key terms.
- Peril: As mentioned earlier, a peril refers to a specific event or cause that leads to loss or damage, such as a fire or theft.
- Hazard: Hazards are conditions or situations that increase the likelihood of a peril occurring. For example, leaving electrical appliances on overnight increases the hazard of a fire.
- Risk: Risk is the probability of a peril occurring due to certain hazards. Insurance assesses risk to determine coverage and premium costs.
Examples of homeowners insurance perils
To better understand how homeowners insurance perils work in real-life scenarios, let's explore two situations, one where a peril is covered and another where it is excluded from the standard policy.
Scenario 1: Covered peril
Imagine you live in a region prone to severe windstorms. One day, a powerful windstorm strikes your area, with gusts reaching hurricane force. During the storm, a large tree near your home uproots and crashes onto your roof, causing extensive damage. As a result, rainwater starts leaking into your home, causing further destruction to your interior, including the walls, floors, and furniture.
In this scenario, your homeowners insurance should provide coverage for both the wind damage and the subsequent water damage. The policy should assist with the repair or replacement costs for the damaged roof, as well as covering the restoration of the interior affected by the rainwater intrusion. Since windstorm damage is a named peril commonly covered by standard homeowners insurance, you can file a claim and receive financial assistance to restore your home to its pre-damage condition.
Scenario 2: Excluded peril
Now, consider a different scenario where your area experiences heavy and prolonged rainfall. The rainwater causes a nearby river to overflow, leading to flooding in your basement. Unfortunately, standard homeowners insurance does not typically cover flood damage.
In this situation, you would need a separate flood insurance policy to receive compensation for the damage to your basement and its contents. Flood insurance is a specialized policy that provides coverage specifically for losses caused by flooding, including those from overflowing bodies of water, heavy rain, or rapid snowmelt.
It's essential to recognize the distinction between water damage caused by a sudden and accidental event, like a burst pipe (usually covered by homeowners insurance), and water damage from external flooding events (usually not covered under standard homeowners insurance). To safeguard your property from flood-related losses, it's advisable to purchase flood insurance if your home is in a flood-prone area.
Know the perils to make an informed decision
Understanding perils in homeowners insurance is vital for any homeowner looking to protect their property and belongings from unforeseen events. While standard policies cover a range of perils, it's essential to review your policy's specifics and consider additional coverage for excluded perils.
By comprehending the risks and hazards associated with your property, you can make informed decisions to safeguard your home and assets effectively.
This story was written byNJ Personal Finance, a partner of NJ.com. The information presented here is created independently from the NJ.com editorial staff, and purchases made through links in this article may result in NJ.com earning a commission.