What is a peril in insurance?
Fact-checked with HomeInsurance.com
Having homeowners insurance coverage protects you against certain hazards and perils. If your home’s roof is damaged after a severe hail storm, you could file an insurance claim to cover the cost of repairing your roof. But don’t assume that your home is 100% protected against all natural disasters and events. It’s important to read over your policy to understand which perils are covered and which are not.
What is a peril in insurance?
In insurance, “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 and a hailstorm or windstorm. Perils are typically named in your insurance policy, so you know which ones are covered and which ones aren’t.
How does covered peril in homeowners insurance work?
Revisit the scenario described above: a severe hailstorm hits your town and causes damage to your roof. A leak develops because of the hail damage, so you file a claim with your homeowners insurance company. Your agent or insurer will confirm that hail damage is an insurance peril, then will send an insurance adjuster out to inspect the damage and process the claim so you can receive a check for the repair.
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 — fortunately, they’re easy to understand.
A named-peril homeowners insurance policy lists the perils that are covered. It typically lists all specific events your insurance company will pay for if there’s a loss. Say you review your policy and find that your insurance coverage doesn’t include earthquakes as a peril. You can pay for coverage that specifically includes earthquakes as a named peril.
Conversely, if your insurance policy includes earthquakes as an insurance peril but you don’t live in an area where earthquakes occur often, you could have earthquakes removed from the list of named perils and save yourself some money.
Open peril home insurance is the most general type of policy. These cover most perils and mishaps without naming them specifically. This doesn’t mean that you’re covered against everything in an open peril policy however. These policies typically include a list of exclusions or hazards that won’t be covered in case of loss. Review your broad peril coverage and the exclusions to make sure you understand what you’re paying for. When in doubt, ask your insurance agent.
All peril vs named peril coverage
Here’s a comparison of all peril vs. named peril coverage:
|Open peril||Named peril|
|Covered events||If not named as an exclusion, it’s included||If it’s not named, it’s excluded|
|Option to add perils||Typically includes most perils, but any excluded may be added as a rider for a fee||Add excluded perils to your policy by purchasing a rider for the additional ones|
|Cost||More expensive, for greater coverage||Less expensive|
Peril vs hazard: what’s the difference?
You may have noticed the use of the term peril in insurance, as well as hazards. Both terms are similar, but have different meanings when it comes to home insurance.
What is a hazard?
A hazard is something that can increase the chances of a peril occurring. For example, fire is one of the most common perils covered by a home insurance policy. A smoker or a lit cigarette may be considered a hazard because either could cause a fire.
Here are four main types of hazards:
- Physical hazards: A physical hazard is an action or condition that can cause a peril to occur. An example of a physical hazard could be a roof that accumulates large amounts of snow and could cause the roof to collapse or a broken boiler, which could explode.
- Legal hazards: A legal hazard could be anything that would increase the likelihood of a lawsuit. Owning a dog from the aggressive-pet list could be considered 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, being too lazy to go and lock your garage door every night could lead to a burglary. The laziness that led to the peril (theft) would be a morale hazard.
The best way to tell the difference between a hazard vs. peril is to consider a hazard the cause and the peril the effect. Here are some examples:
|Smoking in bed||Fire||Physical/moral hazard|
|Broken steps||Injury||Legal/morale hazard|
|A poorly-installed water heater||Flood||Physical/morale hazard|
|A fire breaks out and activates the sprinklers||Flood||Physical hazard|
|An aggressive dog is allowed to go outside unsupervised||Injury||Legal hazard|
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 as a peril by insurance and may need to be added as a paid rider. 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 typically named in your home insurance policy and include events such as fires, theft and vandalism.
- Flooding and earthquakes are typically not covered perils.
- Riders or additional coverages can be added to account for non-named 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 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.