What is a peril in insurance?
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Homeowners insurance financially protects you if your home or personal belongings are damaged or destroyed by a loss covered by your insurance policy. For example, if your home’s roof is damaged because of a windstorm, you may be able to file an insurance claim to help cover the cost of repairing or replacing your roof rather than paying for the entire cost out of pocket. But it’s best not to assume your home and belongings are covered in every scenario. It’s important to understand what a “peril” is and how it applies to your insurance policy, so you know what limitations your insurance coverage may have.
What is a peril in insurance?
A “peril” is an event that causes damage to your home or property and consequently results in financial loss. Some examples of perils include fire, a lightning strike, burglary, a hailstorm or a windstorm. Your policy may have “open perils” coverage in some cases and “named perils” coverage in others.
How does covered peril in homeowners insurance work?
Revisit the scenario described above: a severe windstorm hits your town and causes damage to your roof, so you file a claim with your homeowners insurance company. Your agent or insurer will confirm that an insurance peril caused damage by sending an insurance adjuster to inspect the damage. Then, as long as the claim is covered, your insurer will process the claim and work with you to cover the repair costs (minus your policy’s deductible).
Types of perils in home insurance
It’s important to understand the types of perils in home insurance. There are two primary types you should know about.
A named-peril homeowners insurance policy lists the perils that are covered by your insurer. It typically lists all specific events your insurance company will pay for if there’s a loss. Fire, lightning, windstorms and hail are common perils named in your home insurance policy to help cover your personal belongings if these events damage them.
If a standard policy does not cover all the perils you need it to cover, you may be able to add additional coverage as an endorsement or by getting a separate insurance policy. For example, damage caused by a sump pump overflow is not a named coverage in your policy. You would have to add sump pump coverage as an endorsement to have that peril covered by your insurance.
Open perils home insurance coverage means your insurance covers most perils and mishaps without naming them specifically in your policy. However, this doesn’t mean that you’re covered against everything in an open perils policy. These policies typically have exclusions that won’t be covered in a loss. For example, your home’s structure may have open perils coverage under your homeowners insurance policy, but your policy excludes flood and earthquake coverage on your standard policy.
Peril vs hazard: what’s the difference?
You may have noticed the use of the term “hazards” in insurance. While hazards and perils are often used together, these terms do have different meanings.
What is a hazard?
A hazard is something that increases the chances of a peril occurring. For example, fire is a common peril covered by a home insurance policy. Dry brush near your house is a hazard that could lead to a fire.
Here are four main types of hazards:
- Physical hazards: A physical hazard is an action or condition that can cause a peril. An example of a physical hazard could be a roof that accumulates large amounts of snow and could cause the roof to collapse.
- Legal hazards: A legal hazard could be anything that would increase the likelihood of a lawsuit. Owning a dog from the aggressive-pet list may be a legal hazard.
- Moral hazards: A wrongful, risky or fraudulent act that can lead to a loss. For example, intentionally leaving the door of your home unlocked because you figure if your home is burglarized, you’ll get paid for the stolen items is a moral hazard.
- Morale hazards: Similar to a moral hazard, a reckless or negligent act could be considered a morale hazard. The difference is that the action was unintended. For example, not locking your garage door every night could lead to a burglary. The unlocked door may eventually lead to the peril (theft).
Perils commonly covered by insurance
Now that you have a better idea of the difference between a hazard and a peril, let’s take a look at the most common types of perils included in a standard homeowners policy:
- Weight of ice or snow
- Falling objects
Perils not typically covered by property insurance
Some of the most common events that can cause damage to your property are not necessarily covered under a standard homeowners policy. In these cases, you will likely need to add coverage as an endorsement or get a separate policy. Non-covered perils typically include:
- The meaning of “peril” in insurance is an event that could cause damage or losses to your home and property.
- Perils are named in your home insurance policy, or portions of your policy may have open perils coverage.
- Flooding and earthquakes are typically excluded from standard homeowners insurance.
- Endorsements or additional policies may be needed to cover excluded perils.
When purchasing homeowners insurance, it’s essential to review your documentation to understand what’s covered under your policy. Not everything is covered, even in the most comprehensive home insurance. Perils are the specific disasters or events that your policy covers.
Be sure to review what perils are included (and excluded) to confirm you have the coverage you need. You may add additional perils — such as flooding or earthquakes — by purchasing the specific coverage or rider in order to have the peril covered under your insurance policy.