Covered peril in homeowners insurance refers to the types of damage for which your insurance company will pay. Perils are hazards and events that can cause loss or damage.
Learn more about how homeowners insurance works and how to know if certain perils are covered in your policy.
What Is Covered Peril in Homeowners Insurance?
In homeowners insurance, a peril is a hazard and event that causes loss or damage.
A covered peril is included in your policy. If your home suffers loss or damage from that type of peril, your insurance company will reimburse you a specified amount to cover the damage.
Homeowners insurance protects against various hazards. This is why it is sometimes called "hazard insurance."
If a peril is excluded, then you would not have coverage for the damage caused by that hazard.
How Does Covered Peril Work?
A homeowners insurance policy will assign coverages to your home, property, garage, and other structures for different perils. If your home is damaged by a peril covered in your policy, you can submit a claim to your insurance company. Then, it will pay for the damage or reimburse you for what you had to pay.
If your policy has a deductible, you will have to pay that amount before your insurance will cover any damages.
In order to have your claim approved, an insurance adjuster may come to your home to assess the damage. They will ensure that it was caused by a covered peril. They'll also determine what type of settlement your insurance company will pay.
Another term for peril is risk. Your policy will refer to perils in your policy contract. The term "insured peril" refers to risks or sources of damage that are insured.
Perils may also refer to the source of an injury for which you may be held liable. This could be something like an accident that a visitor suffers on your property.
Covered perils in homeowners insurance can include damage from:
Not all perils are protected on an insurance policy. For instance, flood insurance is not part of homeowners insurance and must be bought separately. Perils that are excluded may be called "uninsured perils." They may also be called "uninsured risks" or "exclusions."
If you live in a flood plain or other area at risk of flooding, you will need to buy flood insurance. You can buy it through the National Flood Insurance Program.
Your policy documents will list which perils are covered and which are not. Some perils or risks may be added by endorsement or rider for an extra cost.
Named Peril vs. Open Perils (All Risk) Insurance Policy
Insured perils will always be outlined in the policy; the exception is an open peril or all-risk policy.
In a named peril insurance policy, the policy will only cover losses due to certain perils. They must be specifically stated in the policy wording. An open perils policy only lists the perils that are not insured as exclusions.
|Named Perils Policy||Open Perils Policy|
|Covers specific risks||Covers all risks|
|Wil name covered risks||Will name any exclusions|
|Less expensive monthly premium||More expensive monthly premium|
|Coverage fewer potential hazards; lower payouts||Covers more potential hazards; higher payouts|
|Any additional coverage must be purchased||Any additional coverage must be purchased|
Since the named peril policy only covers certain perils, it is usually less costly than an all-risk or open perils policy. Extra coverages can be added by endorsement.
An open peril, all risk, or all perils policy covers all perils. But it doesn't cover those that are specifically excluded. It is more comprehensive; therefore, it's more expensive.
Types of Covered Perils
Your policy declaration page (DEC) will show you what type of policy you have based on the form listed.
The insured perils will not be specifically listed on the DEC page. Instead, they will appear in the policy contract wording. Any exclusions will also appear in the wording. It's crucial that you read them; this is even more true in the case of an open perils policy. With open perils, all perils are covered except for those specifically excluded.
Review your policy's exclusions to know which types of peril are covered. Covered perils can include a variety of hazards and damages.
Fire refers to something that produces a spark, flame, or glows. (It doesn't include smoke.) Direct damage due to hostile fire is covered under the fire peril. Hostile fire is a fire that burns where it is not meant to burn, such as a bed or curtains.
Damage or fires caused by lightning are both covered under the lightning peril. Damage to the electrical system or appliances in a home due to a lightning strike will also be covered. Any electrical damage that comes from the company providing the power is not.
Coverage for an explosion can vary; it depends on the policy. A policy may cover just for explosions that start within the covered structure. Or, it can also include those that originate outside and cause damage to the covered structure.
Windstorm relates to damage due to wind. This includes cyclones, tornadoes, and hurricanes. It covers the outside of the property. And depending on the cause of damage, it could also cover the inside.
The interior usually is included if the wind causes an opening to the inside, such as blowing out a window. Some policies have extra deductibles for damage caused by windstorms.
Policies may include damage caused by hail. In most cases, the inside of the structure is only covered if the hail itself breaches the structure and causes internal damage. If the hail came in because of an open window, the hail damage would not be covered. That's because it was due to the open window.
Riot or Civil Commotion
A riot is often defined as three or more people causing damage to property. A civil commotion is defined as damage caused by a large number of people.
Aircraft damage is caused by any flying machines; these could include balloons, helicopters, airplanes, spacecraft, and more.
Some policies cover snow as a peril. It often includes damage to your home from the weight of ice, snow, and sleet.
Water and Sewer
In some states, insurance companies are required by law to offer coverage for damage caused to your home by water and sewer backups. But this isn't the case in all states. You may need to purchase separate sewer insurance.
- Covered peril in homeowners insurance refers to the types of damage for which your insurance company will pay.
- Perils are hazards and events that can cause loss or damage, such as fire, wind, snow, or vandalism.
- Flood damage is not covered by homeowners insurance. It requires a separate flood insurance policy.
- In a named-peril policy, insurance covers the certain perils stated in the policy.
- An open peril or all-risk policy covers all perils except those excluded in the policy.
NC Department of Insurance. "A Consumer's Guide to Homeowner's Insurance," Page 2. Accessed July 9, 2020.
Consumer Financial Protection Bureau. "What Is Homeowner's Insurance? Why Is Homeowner's Insurance Required?" Accessed July 9, 2020.
NC Department of Insurance. "A Consumer's Guide to Homeowner's Insurance," Page 3. Accessed July 9, 2020.
USA.gov. "Property Insurance: Homeowners and Renters Insurance." Accessed July 9, 2020.
Consumer Financial Protection Bureau. "Shop For Homeowner's Insurance." July 9, 2020.
Virginia State Corporation Commission Bureau of Insurance. "Homeowners Insurance Consumer's Guide," Pages 4-5." Accessed July 9, 2020.