Home Insurance

What Is an Insurance Peril?

Checking your insured perils is an important step in making sure you have the proper coverage you need to protect your home.

What Is an Insurance Peril

When it comes to homeowners insurance, a peril is something that can cause damage to an individual or their property. Homeowner perils define specific causes of property and structural damage or injury, and while some perils are covered by your insurance, others may only be covered in certain situations or not at all.

Understanding insured perils is an important step in making sure you have the proper insurance coverage you need. For instance, a flood from a burst pipe is covered in most homeowners’ insurance policies. However, a flood that’s caused by rain is a peril that is not covered in a standard homeowners insurance policy. In this situation, you’ll want to add additional flood insurance coverage.

Open Perils vs. Named Perils

Open Perils

Open perils — sometimes called all perils — will cover you from all risks unless something is specifically excluded, which will be noted within the policy. In general, these policies cover more risks with fewer exclusions based on select circumstances.

For example, many open peril homeowner policies list floods and earthquakes as events that aren’t covered. To get coverage for those and other non-covered perils, you’ll have to purchase an extra insurance policy or an insurance rider.

Named Perils

Alternatively, insurance policies that list what perils they cover, rather than what they do not, are called named peril policies. These policies are restrictive and only come into play when certain perils have occurred.

When insuring a home, an open peril policy is often the first choice for standard insurance coverage. This ensures your home is protected against the more common types of perils, such as storm damage. However, some prefer to select specific perils they wish to have covered, especially if they live in an area where these particular perils are likely, such as fire damage in an area prone to seasonal wildfire. This method pairs an open perils policy with named perils insurance for a wider range of coverage.

Types of Home Insurance Policies and What Perils Are Covered

HO-1 Peril Coverages

HO-1 insurance is the most basic homeowner’s insurance policy, and it typically covers home damage from the following named perils:

  • Fire and lightning
  • Windstorms and hail
  • Explosions
  • Riots and civil commotions
  • Damage from an aircraft
  • Damage from a vehicle
  • Smoke
  • Vandalism and malicious mischief
  • Theft
  • Volcanoes

If you opt for a standalone HO-1 policy, you will have coverage if any one of these situations causes damage to your property. If something outside of this list happens, then there is no coverage.

HO-2 Peril Coverages

An HO-2 policy is similar to an HO-1, but it includes more perils in addition to the ones listed above. It’s still a named peril policy, so your dwelling and personal property will be covered if you experience any of the perils listed above in an HO-1 policy, plus the following:

  • Freezing
  • Falling objects
  • Weight of ice, snow, or sleet
  • Cracking, bulging
  • Artificially generated electric current
  • Water or stream

This insurance coverage is a step up from HO-1, providing more protection for your property. It can also be appealing to people living in colder climates where snow and ice frequently cause home disasters.

HO-3 Peril Coverages

HO-3 policies are the most popular, with coverage for your home, possessions, additional structures on the property, as well as some protection for you and your family from liability and medical costs.

With HO-3, you have named peril coverage for your possessions, but your home and other covered structures (sheds or outbuildings) have an open peril policy, which means that any risk or peril is covered except for a few excluded events which are spelled out in the policy.

HO-4, or Renters Insurance, Peril Coverages

HO-4 insurance is more commonly called renters insurance, and unlike homeowners insurance, the insured doesn’t own the home. Instead, this type of policy covers personal property in the home, legal fees if you’re sued, the medical bills of other people, and temporary living expenses if your rented home becomes uninhabitable. Most renters insurance policies are named peril policies, so you’ll want to know what is covered and what isn’t.

The structure of the rental unit — such as the hallway leading to the door of your apartment or the roof your rental house — is covered through the property owner’s insurance.

HO-5 Peril Coverages

An HO-5 policy is another policy designed for a homeowner, and it’s structured much like an HO-3 but is more comprehensive. In an HO-3, your possessions are still subject to named peril insurance while buildings have broader open peril coverage. But in an HO-5, your possessions fall into an open peril category, which means there is more extensive coverage.

Also, a benefit to homeowners with an HO-5 is that possessions are covered at replacement costs, while an HO-3 policy covers the loss at its current value.

What Perils Are Covered? And What Are Not?

The perils that are most frequently covered are:

  • Fire and lightning
  • Windstorms and hail
  • Explosions
  • Riots and civil commotions
  • Damage from an aircraft
  • Damage from a vehicle
  • Smoke
  • Vandalism and malicious mischief
  • Theft
  • Volcanoes
  • Freezing
  • Falling objects
  • Weight of ice, snow, or sleet
  • Cracking, bulging
  • Artificially generated electric current
  • Water or stream

Keep in mind that the type of homeowners insurance policy you have will affect your peril coverages. For example, HO-1 policies do not cover all of the perils named above. In addition, make sure to check your specific policy to see exactly what is covered if one of these events occurs. For instance, some insurance policies not only cover the damage from something like a lightning strike, but they will also cover the cost of removing trees damaged by lightning. Or a lightning strike can occur nearby and prompt a ground surge, which could be covered by your policy even if lightning did not directly hit your property.

There are also some perils that are commonly excluded from insurance coverage, including:

  • Floods
  • Earthquakes
  • Hail
  • Hurricanes
  • Tornadoes
  • Wildfires

Even though these perils are often excluded from a standard insurance policy, you can still get coverage for them. For example, if you live in an area prone to flooding and want protection against flood damage, you could purchase a separate flood insurance policy.

Difference Between Perils, Hazards, and Risks

While the terms peril, risk, and hazard are used often in insurance, they do not mean the same thing. Risk means that there is a possibility of a loss, while a peril is an event that causes a loss, and a hazard is a condition that increases the possibility of a loss.

For example, there could be a house fire. Every home has the risk of a fire happening. But if there’s a fireplace, that is an additional hazard because it increases the odds of a fire. Then, if a fire occurs, that is a peril because it has caused damage to the property.