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What Is an Insurance Peril?

An insurance peril includes any event that could ultimately cause property damage or property loss. Those perils may come from natural sources such as fire, lightning, or water damage. They may also come from man-made sources such as vandalism or theft. These listed perils are predetermined by the insurer and are included in every homeowners insurance policy.

It’s essential to understand what specific perils are covered in your policy to prevent coverage gaps. For example, many home insurance policies do not list flooding as a peril. Therefore, if you live in an area prone to flooding, you may want to select a policy that includes flooding or water damage as a peril or purchase additional insurance that provides protection in these situations.

Get the Most Out of Home Insurance: Know What’s Covered

Homeowners insurance is essential to protect yourself if something unexpected affects your home. Whether it’s a man-made disaster like vandalism, fire, or natural such as a weather event, you could end up with hefty repair and replacement costs.

These types of damages are ones that would be difficult to pay in a lump sum. Therefore, it’s crucial to understand peril insurance and what is and is not covered by your specific homeowners policy.

For example, in insurance, fire is frequently listed as a covered peril as part of homeowners insurance. However, most home insurance policies only cover fires caused by an accident, such as an electrical malfunction.

The same is true of those with other forms of property insurance such as condo insurance. Renters and condo insurance also utilize perils as the centerpiece of their insurance policies, with many operational principles being similar among them.

Differences Between Perils, Hazards, and Risks

While they may sound similar, perils, hazards, and risks, all have significantly different meanings when it comes to homeowners insurance. They are differentiated by the following:

Peril: A peril is an event that may cause damage to your property or belongings. Some specific perils are covered or insured as part of a homeowners policy.

Risk: A situation that could bring about peril is known as a risk. Risk may include something coverable by insurance, such as faulty electrical wiring, or something that is not, such as owning a house in a floodplain.

Hazard: Defined as a factor that increases the likelihood of peril occurring is known as a hazard. A hazard may include an impending storm that could increase the likelihood of one’s house flooding.

When formulating an insurance policy for a homeowner, an insurer will take all three of these factors into account. In general, those less likely to experience these will pay less for coverage, while someone more likely will generally pay higher insurance policy premiums.

How Do Perils Work With Your Homeowners Insurance?

Generally, homeowners insurance covers perils likely to happen due to an accident or an unexpected situation, though generally not caused by the policyholder. Some of the most common are:

  • Fire (if not intentional)
  • Lightning
  • Windstorm/Hail Damage
  • Vandalism
  • Tornados

While most homeowners policies have different policies regarding what they cover and how much, most policies can be divided into two categories: named and open perils. They are differentiated by the following:

  • Named Peril: Covers only what is explicitly stated in the policy.
  • Open Peril: Covers anything that is not explicitly excluded from the policy.

Most homeowners policies provide both named perils coverage for personal items and open perils coverage for damages to the actual structure of your property. This is also true of condo insurance as well. In contrast, renters insurance typically provides named perils coverage and only covers specified incidents such as fire, theft, or vandalism.

Named Peril

In a named peril policy, the insurer lists the covered perils as part of the policy. In general, anything not explicitly mentioned is not covered. You will need to seek additional coverage to cover perils you’d like protection for but are not listed. For example, a name peril policy may state that it provides coverage against fire, tornados, and vandalism. Because it is not stated explicitly in the policy, that policy will not cover any form of flooding.

The 16 most commonly named perils are:

  1. Fire or lightning
  2. Windstorm or hail
  3. Explosion
  4. Riots
  5. Aircraft
  6. Vehicles
  7. Smoke
  8. Vandalism
  9. Theft
  10. Falling objects
  11. Weight of ice, snow, or sleet
  12. Accidental discharge or overflow of water or steam
  13. Sudden and accidental tearing, cracking, burning, or bulging
  14. Freezing
  15. Sudden and accidental damage due to short-circuiting
  16. Volcanic Eruption

Remember that every homeowners insurance policy is different and may include or exclude these factors at their discretion. Make sure to review your documentation or speak with your specific insurer to find out the specifics of your policy.

Open Peril

Open peril policies generally operate the opposite way, covering any event except those explicitly stated. For example, an open peril policy may cover all perils except earthquakes and flooding. What is not covered is referred to as an exception.

The most common exceptions for peril in insurance policies include the following:

  • Enforcement of building codes and similar laws
  • Earthquakes
  • Flooding
  • Power failures
  • War
  • Nuclear hazard
  • Intentional acts
  • Freezing pipes and systems in vacant dwellings
  • Damage to foundations or pavements from ice and water weight
  • Theft from a dwelling under construction
  • Latent defects, corrosion, industrial smoke, pollution
  • Settling, wear, and tear
  • Pets, other animals, and pests
  • Weather conditions that aggravate other excluded causes of loss
  • Government and association actions
  • Defective construction, design, and maintenance

Keep in mind that every homeowners insurance policy is different and may therefore include or exclude these factors at their discretion. Make sure to review your homeowners insurance documentation or speak with your specific insurer to find out the specifics of your policy.

Types of Perils

Perils encompass many events, whether naturally occurring or man-made, and could cause devastating and expensive damage to your home. Remember that if you sense that your property poses a risk that lies outside of your policy, you may be able to seek additional coverage to protect yourself.

This is known as specialty insurance or an “add-on,” and it can often be obtained from your current insurer or through a third party. While an add-on may cost a little extra, it could be worth it to prevent yourself from paying for out-of-pocket damages.

Weather and Natural Perils

Covered by standard homeowners insurance
Covered by specialty insurance
Falling objects (tree limbs, etc.)
Hurricanes and tropical storms
Landslides and mudslides
Sleet and snow
Volcanic eruption
Water or stream
Wild animal damage

Home Damages From Weather and Natural Perils

Natural catastrophes and extreme weather events are common threats homeowners face. For example, heavy snow could cause your home’s roof to cave in due to the excess weight. Intense hail can also lead to dented siding and broken windows. Flooding is another common peril for homeowners that can allow unsafe water levels to come in contact with your property’s foundation, causing it to shift or crack. 

These types of events are common. In fact, property damage caused by weather and natural perils accounted for nearly 90% of homeowners insurance claims in 2020, with 45% attributed to hail and wind damage.

Coverage For Weather and Natural Perils

Standard homeowners insurance policies do not cover certain types of natural disasters. So if you live in a place prone to them, looking into specialist policies is a good idea.

Even if you don’t live in an area prone to natural disasters, it’s important to understand the definition of what might be excluded from your homeowners insurance. Here are scenarios where you may not receive coverage:

  • Rain: Standard homeowners insurance policies generally cover water damage from rain caused by a covered peril, like a windstorm. However, when the amount of rainfall is sufficient to qualify as a flood, it may fall outside the scope of what’s covered by standard insurance policies. 
  • Water or stream: Generally, standard homeowners insurance will cover sudden and accidental water damage from a source inside your home, like a busted pipe. However, if the damage was caused by flooding outside your home, it may no longer be covered. 
  • Wild animal damage: Wild animal damage coverage doesn’t include the bird nesting holes in your roof or the unwelcomed rat infestations. Instead, homeowners insurance generally only covers damage caused by larger animals like deer or bears since it tends to be unpreventable.

Remember that the price of insurance is always influenced by the insurer’s perception of risk, with applicants possessing a higher level of risk generally paying more for coverage. For example, coverage could come with a higher price tag if you live in a state like California prone to wildfires

Man-made Perils

Covered by standard home insurance
Covered by policy add-on
Aircraft damage
Falling objects (errant baseball, etc.)
Identity theft
Power surge
Riots and civil commotions
Vandalism and malicious mischief
Vehicle damage

Home Damages From Man-made Perils (100 words)

Many man-made perils can damage your home, but they may affect your household differently than a natural disaster. For example, depending on where you live, vandalism, such as graffiti on your property’s exterior walls, can also be a significant issue that could be expensive to remove. 

Theft is also a common reason for filing a homeowners claim. Property damage attributed to theft accounted for nearly 0.6% of homeowners insurance claims in 2020.

Coverage For Man-made Perils

Your homeowners insurance policy typically covers most man-made damage to your home unless you caused the damage yourself. For example, if you are attempting renovations on your own and the frame collapses.

It’s worth noting that though your insurance may cover man-made perils like break-ins and theft, you may pay higher premiums if you live in an area with a higher crime rate. Also, though cybercrime and identity theft coverage are not standard on most policies, you can sometimes add them as a rider tacked onto the policy for a few extra bucks.

What Damages Are Not Covered By Home Insurance?

Homeowners insurance never covers certain damages, typically those relating to normal wear and tear, neglect, etc.

Here are some other forms of damages that are usually excluded from home insurance policies: 

  • Bird and rodent damage: Birds and rodents can cause damage to the home by destroying insulation and wiring, chewing through drywall and wood, or leaving holes in the roof. However, since these issues are preventable, most homeowners insurance policies won’t cover them. 
  • Mold: Homeowners insurance typically does not cover mold damage caused by inadequate maintenance or ventilation systems that allow moisture in the home. 
  • Insect and pest damage: Insect and pest damage refers to damages caused by insects and pests such as termites, carpenter ants, cockroaches, rats, mice, and other vermin.
  • Rot and rust: Rot and rust that are left unchecked can spread throughout an entire home, causing deterioration in furniture, appliances, and even building materials such as drywall or insulation. Because rot and rust are typically due to a lack of maintenance, most homeowners insurance policies do not cover them. 
  • Wear and tear: A common example of wear and tear in a house is paint chipping or fading. This issue can occur due to UV exposure from sunlight or moisture from rain or humidity. 
  • Extreme situations: Most homeowners insurance policies will not cover losses due to extreme situations such as war-related events, bombings, or nuclear attacks.

How Much Do Perils Affect Home Insurance Cost?

As with all forms of insurance, the higher risk you pose in filing a claim, the more you will likely pay for coverage. Homeowners and property insurance are no different. Therefore, if you live in an area where earthquakes, windstorms, and fires frequently occur, you will likely pay higher premiums.

Here are some of the factors that insurers consider when producing quotes:

Policy Type

Home Insurance Form Categories
Named or Open Peril
Covered Perils (Structure)
Covered Perils (Possessions)
HO-1, or 10 Named Perils Insurance
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
Same as covered perils for structure
All standard exclusions, plus: Falling objects; Weight of snow, ice or sleet; Water overflow from plumbing, HVAC, indoor sprinklers or water heater; Frozen plumbing, HVAC, sprinkler system or appliances; Artificially generated electrical currents
HO-2, or 16 Named Perils Insurance
Same as HO-1, plus: Freezing; Falling objects; Weight of ice, snow, or sleet; Cracking, bulging; Artificially generated electric current; Water or stream
Same as covered perils for structure
All standard exclusions, plus water damage caused by sewer or drain backups
HO-3, or Standard Home Insurance
•Structure: Open•Possessions: Named
All except standard exclusions
Same as HO-2
All standard exclusions
HO-4, or Renter’s Insurance
Same as HO-2
All standard exclusions
HO-5, or Open Perils Insurance
All except standard exclusions
All standard exclusions
HO-6, or Condo Insurance
None; covered by master condo insurance policy
Same as HO-2
All standard exclusions
HO-7, or Mobile Home Insurance
Structure: OpenPossession: Named
All except standard exclusions
Same as HO-2
All standard exclusions
HO-8, or Modified Coverage Home Insurance
Same as HO-1
Same as covered perils for structure
All standard exclusions

Different homeowners insurance policies offer different perils coverage. So, your policy type will affect premium costs. For example, if you opt for an open peril policy, you will likely pay a higher premium than if you were to purchase a named peril policy. 

Where You Live

Where you live can impact how much you pay for homeowners insurance. For instance, living in New York or Chicago comes with a high risk of heavy snowfall in the winter, which can cause structural damage to your home. On the other hand, if you live along the coast of certain states like Florida or Louisiana, there’s a greater risk of floods. Insurance companies will account for these variables when determining your rate.  

Therefore, consider seeking location-specific advice when looking at homeowners insurance quotes to ensure you’re adequately covered while keeping costs manageable. Your neighbors or homeowners association may have valuable resources to help you get the coverage you need at a price you can afford.

Home Structure and Build

Your home’s structure and build can make a difference in the cost of your insurance policy. Poor quality or outdated wiring can create perils such as fires, while particular materials like aluminum are more susceptible to hail damage. All these factors will affect whether an insurance company is willing to cover your home for reasonable premiums or if higher costs are necessary due to a greater risk of potential losses. 

Home Age and Condition

When it comes to costs in insurance older houses may have higher premiums, older homes have a higher risk of damage from plumbing issues, electrical fires, or structural instability. On the other hand, if you own a new property built up to modern code with advanced safety features such as a monitored alarm system or storm shutters, you may be eligible for lower premiums. 

Your Personal Risk Factors

Your personal risk history, like your credit score, claims history, and even marital status can affect your rates, as they provide a risk assessment based on historical data. 

  • Credit score and history: Your credit score measures your creditworthiness, and your credit history records how you’ve used credit. A higher credit score may indicate to insurers that you are less likely to file a claim in the future based on the insurers’ data and may reward you with lower premiums.
  • Claims history: Your claims history includes any previous instances where you’ve made a claim on an insurance policy. As with credit score, if you have minimal claims history, you may ultimately pay less for coverage.
  • Marriage status: Your marriage status indicates whether you’re married or single. Insurance companies typically see married people as more responsible and less likely to file a claim, and they may find less expensive rates than single people.

Other Premium Factor: Your Policy Details

Though your policy details, like the deductible and coverage amount, are not directly related to perils that may happen to your home, they could affect your homeowners insurance rate. 

  • Deductible: A deductible is the out-of-pocket amount paid before an insurer begins covering costs. A higher deductible typically means a lower premium since you take on more responsibility and will have to reach into your own pocket to pay for damages before the insurance company chips in. 
  • Coverage amounts: Coverage amounts refer to how much an insurer is willing to cover in total. Generally, the lower the coverage amount, the lower the premium.
  • Home value: A more expensive home generally equates to higher premiums, mainly because it could be costlier to rebuild or repair.

How to Evaluate and Lower Your Peril Risk (and Keep Your Home Insurance Costs Down)

One of the best ways to avoid spending a fortune on home repairs and insurance is to minimize the need to file a claim. However, to perform the preventative maintenance necessary to that end, you’ll need to first audit your home to detect any potential risks and hazards.

Here’s how to get started:

1. Identify if your area is prone to any recurring weather events.

Your insurance costs could increase if you live in an area prone to natural disasters like floods or hurricanes. Fortunately, there are many resources available to help you determine that. For example, to check if your home is in a flood zone, enter your address into FEMA’s online flood map service center. Then, it’ll show you whether your home is in a low-, moderate-, or high-risk area. 

2. Identify if your area is prone to any recurring man-made events.

Living in an area or neighborhood with a high crime rate could be a red flag for insurance companies and lead to higher premiums. To gauge whether your area is susceptible to man-made perils, use the FBI’s Crime Data Explorer tool to view crime statistics in your neighborhood. 

3. Install and/or enact prevention measures.

A few simple steps can help lower your peril risk and insurance premium. For instance, if you live in an area with frequent storms, invest in storm windows or reinforced shutters to ensure your windows are not broken during high winds. And if you live in a neighborhood with a high theft rate, install a security system and secure locks at your home’s entrance doors. 

4. Consider purchasing additional coverage.

Consider purchasing additional coverage like an umbrella policy if you have items of a higher value that regular homeowners insurance does not cover, such as antiques, musical instruments, and electronics. You also may want to consider Umbrella Insurance: extra coverage that provides protection beyond the coverage of your existing policies. 

5. Evaluate your coverage on a regular basis.

Situations change, including those that could potentially affect your property. By evaluating your coverage regularly, you can ensure that it’s keeping up with your current needs and that you’re not over or underinsured.

What This Means For You

A homeowners policy is a contract between you and your insurer. However, given the diverse locations and lives that people live, ensuring you have the insurance in the right policy for your needs is of the utmost importance. While price will play an essential role in that decision, it should not be the sole determining factor.

At the end of the day, you want to make sure you can protect the possessions your family holds dear. Therefore, understanding how perils work in homeowners insurance can help protect your things for the next generation and beyond.