When it comes to insurance, we often know how much coverage we have for homes, but it seems that when it comes to knowing what types of claims are covered, it’s not as well understood. In most homeowners insurance policies there are two types of forms: named peril and open peril.
Named Peril:
A named peril policy is a policy that specifically names the perils that will be covered. Often times, things such as fire, lightning, explosion, smoke, wind, hail, vandalism, riots, and certain types water damage are covered. Depending on the policy, what is covered will vary but if it’s not listed, it will not be covered.
Open Peril:
On the other hand, an open peril policy will cover any peril that is not excluded from the policy. Common exclusions for a homeowner policy are war, earth movement, floods, and nuclear hazards. Again, each open peril policy will have different exclusions, but unless it’s specifically excluded in the policy, it will be covered.
Example
So let’s say that during a house party, a guest spills their drink on your brand new couch. It’s unlikely that a named peril policy will have a named peril for “drink spilling” so it would most likely not be covered. However, on an open peril policy, unless “drink spilling” is excluded, you’re in luck!
To further complicate matters, it is common on a homeowners policy to separate what is covered for the structure and the contents. So for example, some policies will cover the structure of the home on an open peril basis but the contents on a named peril basis, while another might cover both the home and the contents on an open peril basis. It’s a good thing to know, and your agent should be able to quickly tell you what type of policy you have.