Named Perils Coverage Versus Open Perils Coverage

WHAT IS THE DIFFERENCE BETWEEN A NAMED PERILS INSURANCE POLICY AND AN OPEN PERILS INSURANCE POLICY?

When you purchase home insurance, one of the critical decisions you need to make is whether to choose named perils coverage or open perils coverage for your home’s structure and its contents. As with any important choice, you want to have the key details about all your options so you can make an informed decision, which is why The Andover Companies is providing you with insight into the main differences between these two coverage selections.

But before we explore these home insurance options, we want to make sure all homeowners know what “insurance peril” means. In the insurance world, a peril is defined as a potential event or circumstance that could result in damages to your home, belongings, and other structures on your property. Your insurance company typically only pays to help you repair, replace, or rebuild after a loss when it is due to a peril that is covered by your specific homeowners policy. Which events may and may not be covered will depend in large part on whether you have chosen named perils coverage or open perils coverage.

What Is Named Perils Coverage?

If you have named perils coverage, also sometimes called “specified perils coverage,” your home’s structure and its contents are only protected against the perils that are specifically named in your policy. Following are the most common perils that may be listed in this type of policy:

Additionally, a named perils policy typically includes damage caused by aircraft and vehicles as long as they are not owned by the insured; sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air-conditioning system, or an automatic fire-protective system; and sudden and accidental damage from artificially generated electrical current excluding losses to a tube, transistor, or similar electronic component.

How many of these perils, and which ones, are actually named in your homeowners policy will depend on which form of named perils coverage you select—basic or broad. A policy with basic named perils coverage will have a more limited list of covered events than one with broad named perils coverage.

What Is Open Perils Coverage?

If you want more extensive protection for your property than what named perils coverage offers, an open perils coverage policy is typically what you want. As opposed to named perils coverage, where a loss must be listed in your policy to be covered, with open perils coverage your property is protected against most perils, except those specifically listed in your policy as exclusions.

Similar to named perils coverage, though, how broad your property protection is will depend on which type of open perils coverage you have in your homeowners policy. For example, you may have a policy that offers open perils coverage for just the structure of your home, while providing named perils coverage for its contents. Or, you may have a more comprehensive home insurance policy that provides open perils coverage for both.

Now that you have a better understanding of named perils coverage and open perils coverage, you may be curious about which type you have in your current homeowners policy. To find out, you could go to your policy documents and look for a section that lists out all the perils you are insured against, which should be directly followed by a section that lists the perils that are excluded.

A much easier way to figure out what type of coverage you currently have, however, is to contact your local insurance agent. Not only will this professional be able to quickly identify and explain the homeowners policy coverages you have today, but they can also help you decide whether what you have is sufficient or if you should consider broadening it. In addition, since there will be risks that are not included in either named perils or open perils coverage, your agent can recommend additional coverages to better protect your home and belongings, such as scheduled personal property, earthquake, and water backup.