In insurance-speak, a peril is a specific type of loss or damage that a property policy is insured against. The perils that are listed in the homeowner’s insurance plan are only the ones that the provider will cover should an unfortunate event happen. But that’s not all there is to it. Perils can be either named, with inclusions explicitly identified, or open, covering all types of risks.
This article discusses what open peril means in property insurance, its pros and cons, and what homeowners should know before purchasing it.
What is Open Peril Coverage?
Also referred to as an all-risk insurance, open peril coverage is an option where the provider will pay to replace any item that had been damaged or lost by any event that’s not specifically excluded in the policy. The property insurance plan will have a list of things that it will not cover as part of the contract. Anything that does not fall under this list will be paid or reimbursed.
Note, however, that while the open peril definition mentions “all risk” protection, insurance providers typically will not shoulder any losses related to the following:
- Power outages
- Natural disasters (ex. earthquakes, floods, landslides, etc.)
- Mechanical breakdowns (ex. boiler blasts)
- Pollutants and fungi-formation
- Corrosion and rust
- Damage due to insect pests and animals
- Employee fraud or theft
The list varies depending on the company. To be sure, talk to your insurance agency about the specifics before signing up for any open perils policy.
Named Peril vs. Open Peril
In your search for open peril coverage, you will most likely come across named peril coverage because property owners almost always end up choosing between these two. While open perils begin with the premise that all risks are covered (with some exclusion), named perils pay for only those perils that are listed in the contract.
As such, named peril coverage is typically less expensive than open peril coverage because the terms of coverage are narrower. If you feel that your home is exposed to multiple risks for loss or damage or if you have high-value equipment in the premises, you might want to consider paying a little more in monthly premiums for extensive protection from an open peril policy.
What Homeowners Should Know About Open Perils
To make open peril coverage easier to understand, here is a rundown of things home property owners should know about this type of insurance coverage.
- Open peril coverage generally pays for all types of risks unless the policy has a specific list of exclusions.
- Named peril coverage only pays for the personal belongings that were lost or damaged in relation to specific, pre-identified situations or events.
- There are limits of liability to both open and named perils, and you should check what these are with your insurance policy provider.
- Open peril plans have a higher monthly premium than named peril policies because they have a wider scope of coverage for losses.
- If you own expensive items or are at a greater risk for damage or loss, it is worth investing in an open peril property plan.
Should You Get an Open Peril Homeowners Policy?
Choosing between a named peril vs. open peril plan depends on what you need. As mentioned, having big ticket items or increased exposure to potential damage will merit a slightly higher investment in an open peril homeowners insurance policy. However, if you don’t foresee your property experiencing any threats in the future, then getting a named peril plan that’s within your budget might be a smarter move.
Secure Your Home With InsurA
When in doubt, trust an experienced insurance agency to help you make a sound peril policy decision.
InsurA has assisted many residential property owners in choosing the best type of homeowners insurance that suits their needs and budget. Our genuine concern for our client’s well-being and stability drives the way we operate to ensure that clients are well informed and correctly insured. Contact the InsurA team today to learn more about our services.