What is a peril in home insurance?

In homeowners insurance, a peril is an event that may cause property damage and financial loss to the policyholder. Fire, theft, wind, and vandalism are common perils that most homeowners policies cover. Understanding what perils your home insurance covers is key to making sure you have the appropriate protection.

Types of home insurance perils

There are many types of perils that can cause damage to your home. Some common examples include:

• Fire.

• Hail.

• Theft.

• Vandalism.

• Falling objects.

Whether or not your homeowners insurance covers a particular peril depends on the policy terms. There are two different types of policies that define which perils are covered in different ways: named perils and open perils.

Named perils insurance policies only protect homeowners against a specific list of perils. Your home insurance company won’t cover damage if it’s caused by an event that’s not on the list. On the other hand, open perils policies (sometimes “all-risk insurance”) means you’re covered for any peril except those your policy specifically exclude.

You can have open perils coverage for some of your property and named perils coverage on others. For example, it’s pretty common for people to have open perils coverage on their primary residence but named perils coverage for their personal property.

Open perils policies provide broader coverage, but named perils policies are usually less expensive. Either way, both types include exclusions and types of risks that aren’t covered.

Named perils

Named perils insurance policies typically cover loss or damage from these 16 events:

1. Fire or lightning

2. Windstorm or hail

3. Explosion

4. Riot or civil commotion

5. Aircraft

6. Vehicles

7. Smoke

8. Vandalism

9. Theft

10. Volcanic eruption

11. Falling object

12. Weight of ice, snow, or sleet

13. Accidental water overflow or steam

14. Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems

15. Freezing

16. Sudden and accidental damage from artificially generated electrical current

With a named perils policy you’re only protected if the cause of a loss is one of these listed perils, and that leaves a lot of gaps.

Open perils

Open perils coverage (sometimes called “all-risk insurance”) means all perils are covered except for those the policy either excludes or doesn’t cover – essentially, the opposite of how named perils work. In an open perils policy, more losses are covered, and you know exactly which aren’t.

What perils are commonly excluded in open perils coverage?

Standard exclusions in an open perils policy can vary depending on your state and your insurance company, so look at your policy or ask your insurance agent about your coverage details. In some cases, you can get an excluded peril covered by adding an insurance rider for an additional fee.

That said, these perils are usually listed as exclusions in an open perils policy.

• Land movement. This includes earthquakes, sinkholes, landslides and other scenarios where the earth moves.

• Flood and water damage. This includes sewer backup, overflow from sump pumps, and water below the ground that affects your foundation. This also includes storm surges – only flood insurance covers that.

• Power failure. This is usually not covered when the failure takes place off premises.

• Neglect. Along with reasonable upkeep, you must do all you can within your means to prevent loss from occurring and from a loss getting worse if your property is damaged.

• War. This exclusion can be very broad and may include undeclared war, rebellion, civil war, revolution, and insurrection.

• Nuclear hazard. Let’s hope this never happens.

• Intentional loss. If you or another insured cause a loss on purpose, it won’t be covered by your policy.

• Frozen pipes in a vacant property. In most policies, a property is considered vacant or unoccupied after 30 days. You should note, too, that you have a responsibility to drain water from your pipes and to make sure the water in your home is turned off.

• Ice and water pressure. This is when ice freezes or thaws and causes damage to a fence, patio, pavement, swimming pool, foundation, or retaining wall. This also includes damage done by the weight of accumulated ice or water. 

• Construction theft. Theft is not covered until a dwelling is finished and occupied.

• Vandalism and mischief in a vacant property. This is not covered if the premises have been vacant or unoccupied for more than 30 days.

• Wear and tear. This is normal and expected, so it’s not covered by insurance.

• Mechanical deficiency or breakdown. Appliance and other mechanical equipment breakdowns are usually not covered by your homeowners insurance policy. Some insurers offer equipment breakdown insurance as an endorsement. 

• Smog, rust, corrosion, and rot. These things happen slowly, so you should be able to take preventive action before a loss happens.

• Industrial / agricultural smoke. This refers to any damage that may result from smoke or smog from nearby industrial or agricultural operations that affect your property.

• Settling, shrinking, bulging, or expansion. This includes the results of earth movement, like cracked pavement, foundations, and walls.

• Birds, vermin, rodents, or insects. Typically, home insurance doesn't cover termites and other pests, so keep a critter-free property.

• Animals you own. This generally includes any loss to your property caused by an animal that you own. Animal liability is a different beast.

What coverage parts are triggered by covered perils?

A standard homeowners insurance policy includes six coverage parts, four of which can be triggered when a covered peril damages a particular aspect of your property.

Dwelling coverage

Also called Coverage A, dwelling coverage insures the structure of your home against damage. For example, if a covered peril like wind puts a hole in your roof, your insurance company pays for the repairs up to your coverage limit and minus your deductible.

Other structures

Coverage B protects the other structures on your property. For home insurance, these are usually not attached to your home, like separate garages or sheds. Your other structures coverage typically insures against the same perils as your dwelling insurance.

Personal property

On standard home insurance, personal property coverage, also called Coverage C, is usually written on a named perils basis. This means your personal belongings, like appliances, jewelry, and furniture, are insured against the perils mentioned in the policy.

Loss of use

Coverage D, also known as loss of use coverage, is unique in that it doesn’t insure the physical damage a peril might cause to your home. Instead, it’s triggered when that damage forces you to spend more than your normal living expenses. 

For instance, if damage from a covered loss causes you to relocate, loss of use coverage helps pay the additional cost that might come with finding temporary housing.

What is the difference between a peril and a hazard?

Peril and hazard are synonyms for people at large, but they’re actually different ideas in the insurance industry. A peril is an event that can cause damage to your property or create personal liability. A hazard is a factor or circumstances that can increase the odds of a peril occurring.

And just for good measure, risk is still another concept for an insurance company. It typically describes the chance of a particular peril occuring. So for example, wind is a peril, and your home could have a lot of wind risk based on its location.

How to determine your policy’s covered perils

In many cases, determining what perils are covered is as easy as identifying what type of policy you have. The chart below lists common policy forms and whether they typically have named perils or open perils coverage.

Peril coverage by policy type

Even if you’ve identified your policy type on the chart above, it’s important to read your policy to ensure you understand what is - and isn’t - covered by your policy. 

Find the section titled “Perils Insured Against.” In a named perils insurance policy, that section will tell you the perils that are covered. For open peril coverage, that section lists the exclusions.  All that said, remember that you can also call your insurance agent if you need assistance. 

What insurance riders can you get to protect against perils not covered?

As we mentioned before, you can sometimes get insured against excluded perils by adding a rider to your home insurance policy. Common home insurance riders include:

• Water backup and sump overflow coverage.

• Identity theft coverage.

• Scheduled personal property coverage.

• Building code coverage.

Some insurance companies also offer a rider that changes your personal property insurance from named perils coverage to open perils coverage. The availability of this and all riders depends on your insurer, so be sure to talk to your agent for details.