What is the difference between Named Perils vs. Open Perils?
Do you know what your home insurance policy covers?
PERIL – A peril is also known as a cause of loss or something that causes damage to your property.
Some of the most common perils we see in the southern U.S. are things like hail, wind, water damage, and fires to name the most common ones. If your roof is damaged from wind or hail, and it meets the requirements by the insurance adjuster for repair or replacement, this would be covered under a homeowner’s policy after you meet your deductible and any depreciation depending on whether or not you have Replacement Cost Coverage or Actual Cash Value coverage. HO3 policies are what we see most, and they are replacement cost coverage. Some companies are adding a Roof Payment Schedule as well on an HO3 policy which basically reduces the amount of coverage about 3% per year since the roof wears out like a pair of shoes and an insurance policy is meant for acute issues, not wear and tear.
What does it mean if I have Named Perils on my home policy?
A named perils policy means that claims would be paid out on the policy if the damage is caused by list of potential perils named on the policy that could cause damage to your home. If a loss happens to your home that is NOT on this list of causes of loss, then it would NOT be covered under the policy. We find this to be the most confusing and least disclosed part of a home policy since there are some companies that only offer a named perils policy and their salespeople don’t fully disclose that this is the best option they have, for fear of losing a commission. These policies are generally less expensive.
What does it mean if I have an Open Perils policy on my home?
An open perils policy states that the insurance company will pay for any direct physical damage to the home unless that loss is excluded. Some of those exclusions are: collapse, damage from freezing if you chose not to heat the home, wear and tear, earth movement, nuclear war and most home policies don’t include flooding from rising waters.
If you have a mortgage on your home, there is a good chance that your lender will require an open perils or all-risk policy. These policies cover more problems than a named perils policy so there is typically, but not always more cost associated with these.
Working with an independent agency like Ryan Everet Insurance allows you to get fully educated on all of your options from multiple companies. If you want a Named Perils policy, we can do that. If you want an Open Perils policy, we can do that as well. Our default is to offer the higher coverage option and educate our clients on their options.