Cost & Coverage
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A peril in homeowners insurance is something that causes damage or loss to your property
Perils are also referred to as risks and hazards
Certain perils that are excluded from homeowners insurance—like flooding—can be insured with additional coverage
Homeowners insurance protects your home and personal property against damage caused by the perils or conditions covered by your policy. Your homeowners insurance policy lists perils that it covers, including elemental perils like fire, wind and ice as well as human-induced perils like burglary, vandalism and rioting. Your policy also lists perils that it doesn’t cover, including flooding, earthquakes, neglect, and intentional acts.
Depending on your insurance company, you may be able to add additional coverage or endorsements onto your policy to cover certain perils (like earthquake damage or water damage caused by sewer and drain backup) that aren’t covered in your base policy. Your insurer may also offer coverage enhancements for existing policy components—like replacement cost reimbursements for your personal property—for an additional premium.
In this article:
When setting up your homeowners insurance policy or filing a claim, you’ll likely hear a healthy dose of insurance jargon thrown around. Perils, risks, and hazards are just a few of the many terms you’ll hear. And while each has its own distinct dictionary definition, the three are often used interchangeably in the property insurance world. But there are distinct use cases that you should be aware of.
These terms refer to the quality of coverage for the sections of your policy that cover the home’s structure and your personal belongings. If named perils are covered, that means you’re protected from the 16 perils specifically indicated in the policy. If all risks or open perils are covered, that means you’re covered by everything except what’s specifically listed in the policy. In a standard HO-3 homeowners insurance policy, your home is typically covered by open perils or all risks and your personal property is covered by named perils. All risks and open perils coverage is the best and most comprehensive, as it covers every named risk plus perils not explicitly mentioned in the policy.
Low risk and high risk are simply categorical terms to describe how likely your home will incur a loss. A home can be considered high risk if it’s in an area that experiences frequent hurricanes or simply because it’s old and has a higher risk of pipe bursts or electrical fires.
When taking out a mortgage on a home, it’s common for lenders to require hazard insurance, which is simply another way of saying that you need homeowners insurance. Although hazard insurance specifically refers to the section of your policy that covers your home against specific perils or hazards, most companies don’t sell policies without a liability coverage component as well.
As we detail in the table below, a standard HO-3 homeowners insurance policy (the coverage form offered by major insurance companies) covers your home with open perils and personal property with named perils. We also included coverage details about other policy forms, including the lesser common HO-1 and HO-2 homeowners insurance, HO-4 renters insurance, and HO-6 condo insurance.
|Perils||Basic HO-1 policy (Dwelling and personal property)||Broad HO-2 policy (Dwelling and personal property)||Special HO-3 policy (Dwelling)||Special HO-3 policy (Personal property)||HO-4 Renters (Personal property)||HO-6 Condo (Dwelling)||HO-6 Condo (Personal property)|
|Fire or lightning||x||x||x||x||x||x||x|
|Windstorm or hail||x||x||x||x||x||x||x|
|Riot or civil commotion||x||x||x||x||x||x||x|
|Weight of snow, ice, or sleet||x||x||x||x||x||x|
|Accidental discharge or overflow of water or steam||x||x||x||x||x||x|
|Sudden and accidental tearing apart, cracking, burning or bulging||x||x||x||x||x||x|
|Freezing of plumbing||x||x||x||x||x||x|
|Sudden and accidental damage from an artificially generated electrical current||x||x||x||x||x||x|
|All perils except earth movement, flooding, and a number of other perils enumerated in this article||x||x|
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Your homeowners insurance policy will also list several perils that aren’t covered. A peril that isn’t covered by insurance is referred to as an exclusion in your policy. Typical disasters and damage not covered by homeowners insurance include:
Flooding is typically excluded from standard homeowners insurance policies. Flooding, in this case, refers to water flowing in from the outside, a sewer or drain backup, or groundwater or surface water seeping up into your home’s foundation. However, if heavy winds blow the roof off of your home and it suddenly becomes inundated because of the wind-driven rain entering from the giant opening, the initial water damage would be covered because wind damage (a covered peril) would be considered the proximate cause of the damage that came after. To cover your home against flooding, you’ll need flood insurance or a flood endorsement for your homeowners policy. To cover your home against sewer or drain backup, you’ll need a water backup coverage endorsement.
Damage caused by earth movement—earthquakes, tremors, landslides, mudslides, subsidence and sinkholes—are also excluded from a standard policy. You’ll need to add an earthquake endorsement or purchase a separate earthquake policy for protection against quakes, shockwaves, and tremors.
Pest damage from rodents, termites, bed bugs, and birds are also excluded from homeowners insurance. In addition to infestations, insurers also exclude anything they deem “neglect”, including mold growth that is slow-growing and obvious, roof damage if the roof is over 20 years old, and any other type of damage that can be attributed to a lack of maintenance.
The ordinance or law exclusion refers to ordinances or laws that stipulate that you demolish, repair, renovate or remodel your home to meet local building ordinances. Basically, the costs of anything home-related that address a government-sanctioned law or ordinance are not covered. However, most major insurance companies offer ordinance or law coverage endorsements that you can add onto your policy for a small additional premium. Some companies may also include a limited amount of ordinance or law coverage (typically $10,000) in the base policy.
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