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When something goes wrong in your home, you may wonder whether your insurance will help cover the damage. The answer often depends on the peril that caused the problem. But what does peril mean when it comes to insurance? Knowing which events your policy covers — and which it excludes — can help you better understand your coverage and what to expect if you need to file a claim.
Key Points
• The definition of peril in insurance is an event or circumstance that can cause damage or loss to your property or personal belongings.
• Insurance policies typically define covered perils using one of two approaches: named perils policies or open perils policies.
• Named perils policies specifically list the events covered, meaning damage or loss from unlisted perils generally is not covered.
• Open perils policies take a broader approach, typically covering damage from any peril unless specifically excluded by the policy.
• Common perils include weather events, natural disasters, theft, and vandalism, while floods and earthquakes often require separate coverage.
• A hazard differs from a peril because hazards increase the likelihood of damage or loss rather than causing damage directly.
Peril Definition in Insurance
A peril, as defined in homeowners insurance or rental insurance, is an event or circumstance that can cause damage or loss to your property or personal belongings.
The perils covered by your policy depend on the type of policy and its specific terms and exclusions. Understanding what your policy covers when you’re buying homeowners insurance can help you know what to expect if your home or belongings are damaged.
Named Perils vs Open Perils Policies
What does homeowners insurance cover when it comes to peril? Insurance policies often take one of two approaches to defining covered perils: named perils policies or open perils policies.
With a named perils policy, the policy specifically lists the events it covers. If a covered peril causes damage, you may be able to file a claim, subject to the policy’s terms, limits, and deductible. Damage caused by a peril that isn’t listed generally isn’t covered.
An open perils policy takes a broader approach. It generally covers damage from any peril unless that peril is specifically excluded. This doesn’t necessarily mean every type of damage is covered, so it’s important to review the policy’s exclusions and other limitations.
Recommended: Homeowners Insurance Glossary
Peril vs Hazard: What’s the Difference?
Although the terms “peril” and “hazard” are sometimes used interchangeably in everyday conversation, they have different meanings in insurance.
A peril is something that causes damage or loss. A fire can be a peril, as can a storm.
Hazards don’t cause damage directly. Rather they are situations that increase the likelihood of damage or loss. For example, a dead tree near your house could be considered a hazard because it may fall on the building. Clogged gutters or missing shingles on your roof might increase the chance of a leak. A swimming pool or hot tub might raise the risk of personal injury.
It’s important to be aware that the term “hazard insurance” is also different from a hazard. It refers to the portion of your homeowners insurance that covers the structure of your home and additional structures on your property. Homeowners insurance as a whole also includes coverage for things like liability and personal belongings.
Common Examples of Insurance Perils
Common perils often include weather events and natural disasters beyond human control. They may also include things like theft and vandalism
Common perils and the related losses and damages that may be covered include:
• Fire and lightning: Losses resulting from fire, smoke, or a lightning strike
• Wind and hail: Property damage caused by strong winds, tornadoes, or hail
• Theft and vandalism: Stolen personal property or damage caused intentionally by others
• Falling objects: Damage that occurs when trees, branches, or other objects fall onto the home
• Ice, snow, and sleet: Damage to the home resulting from the weight of accumulated ice, snow, or sleet
• Explosions and vehicle impacts: Property damage resulting from an explosion or a vehicle striking the home
• Accidental water damage: Sudden and accidental overflow of water from plumbing, heating, or air-conditioning systems that doesn’t result from a lack of maintenance
It’s important to keep in mind that policies vary. And not every peril is covered by a standard homeowners or renters insurance policy.
For example, flood and earthquake damage are often excluded and may require separate flood insurance and earthquake coverage. Policies may also exclude damage caused by normal wear and tear or a lack of maintenance.
Because coverage varies, it’s important to check your specific policy to understand exactly which perils are covered, which are excluded, and whether additional insurance may be needed.
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How Covered Perils Affect Your Insurance Claim
Your insurance will typically only pay for claims that are made against perils that are specifically named or unexcluded, depending on what type of policy you have.
With a named perils policy, the cause of the loss generally must appear on the policy’s list of covered perils. If a covered event causes damage, the policy may pay for the loss after applying the deductible and other applicable terms.
With an open perils policy, coverage generally applies unless the cause of the loss is specifically excluded.
The Takeaway
A peril is an event that can cause damage or loss, such as a fire, theft, windstorm, or falling tree. Knowing which perils a policy covers can help you decide what kind of policy you need and understand when your insurance may pay a claim.
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FAQ
What is an example of a peril in insurance?
A peril is an event or circumstance that causes damage or loss to your property. For instance, depending on the policy, a tree branch that falls on your house and damages your roof may be a peril. An act of vandalism that causes a broken window could also be a peril.
Is fire considered a peril or a hazard?
A fire that actually burns your home and causes damage or loss is a peril. However, there may be hazards that can increase the chances of damage by fire, such as frayed electrical wiring or poorly maintained fireplace.
What does it mean if a policy covers “all perils”?
If a policy covers all perils, it’s likely an open policy. This means that it will cover perils that are not specifically excluded by the policy. Floods and earthquakes are common exclusions to open policies.
Does homeowners insurance cover every type of peril?
No, homeowners insurance does not cover every type of peril. Floods, earthquakes, damage by insects, and sewer backups are all examples of perils that typically aren’t covered.
What is the difference between a peril and a risk in insurance?
A peril is a specific event that causes damage or loss. A risk is the chance or probability that something bad will happen and cause a monetary loss. For instance, some houses in the U.S. are in areas that are prone to wildfire, putting the house at greater risk. If the house burns, the fire itself is the peril.
Photo credit: iStock/Hirurg
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