Open perils vs. named perils: What’s the difference
If you give a mouse a cookie, he’ll need a glass of milk. And if you buy a home, you’ll need homeowners insurance. That’s because homeowners insurance is required in all fifty states. So whether you’re purchasing homeowners insurance for the first time or shopping for new coverage, you’ll want to read through the entire policy closely so you know what your provider will and will not cover, in case any issues arise. And in the world of homeowners insurance, when those issues do come up, they’re referred to as perils.
But what, pray tell, is a peril? What follows are some perils of wisdom to help you answer that very question (we’ve obviously been waiting a long time to use that line).
To put it simply, a peril is an event that can cause damage or loss. These are different from hazards, which are situations that make it more likely for perils to occur. Ice on your front porch (a hazard) makes it more likely that you slip and maybe break your ankle (a peril, though not one necessarily covered by homeowners insurance!).
And to further complicate matters, peril policy comes in two flavors: open peril (or all risk) and named peril.
In a named peril policy, coverage is only provided for the particular perils explicitly listed in the policy. Anything not mentioned is excluded, which could mean you end up paying out of pocket.
An open perils policy, on the other hand, is often more comprehensive, listing what it does not cover as exclusions. Because open peril policies tend to be more comprehensive, they are also usually more expensive, with higher monthly premiums. And they do still have some exclusions. Unfortunately, no policy straight out of the box protects against all risks, so it’s fairly common for people to add coverage by purchasing riders or endorsements.
Another reason to blend coverage is that perils can be both structural and personal — resulting in uneven coverage. What do we mean by that? For example: While it’s pretty common to see the home’s structure insured by an open perils plan, the contents inside may only be protected on a named perils policy. That means the owner may be able to file a claim for the value of the home following a wider variety of disasters, but their possessions would only be protected against losses resulting from specific, named events.
When you buy homeowners insurance, you’ll want to spend some time thinking about the risks in your area: Does it snow? Are there wildfires? Do you live near a runway? Once you’ve assessed your environment, you’ll be able to purchase the homeowners insurance policy that’s right for you, with coverage that will protect you from some of the more common risks in your area.
At Marble, we want you to feel confident and in control of your insurance. Knowing what your homeowners insurance policy covers — and equally, what it doesn’t — is one important piece of that. Another: having all your insurance policies at your fingertips when you need them most. Get organized and get rewarded by creating your Marble wallet today.