Types of Homeowners Insurance

Types of Homeowners Insurance:

Named Perils vs. Open Perils

Basic, Broad and Special Forms

The word “Perils” is insurance industry language for the causes of loss that are covered in a property policy.  There is a substantial difference between Named Perils and Open Perils coverage.  Open Perils insure against all causes of loss that are not specifically excluded on the policy and Named Perils provide coverage for only the perils listed in the policy.

To further clarify (or muddy the waters, depending on your perspective), there are three Insurance Services Office (ISO) coverage forms for property:  Basic, Broad and Special.  Basic and Broad forms offer Named Perils.  Special form provides Open Perils.

Basic form Named Perils is limited to the following causes of loss:

  • Fire or Lightning
  • Windstorm or Hal
  • Explosion
  • Riot or Civil Commotion
  • Aircraft
  • Vehicles
  • Smoke (meaning sudden or accidental damage from smoke)
  • Vandalism or Malicious Mischief
  • Sprinkler Leakage
  • Sinkhole Collapse
  • Volcanic Action

Broad form Named Perils insure against all of the above listed perils plus the following additional causes of loss:

  • Burglary/Break-in damage
  • Falling objects
  • Weight of snow, ice or sleet
  • Water Damage (in the form of leakage from appliances)
  • Collapse from specified causes

In contrast, Special form includes Open Perils coverage which, again, provides coverage for any peril unless specifically excluded in the policy.  Following are some common exclusions:

  • Flood (may purchase a separate flood insurance policy)
  • Earthquake (may be added to the policy by endorsement in most cases)
  • Ordinance of Law
  • Power Failure
  • Neglect
  • Ware
  • Nuclear Hazard
  • Intentional Acts

The central point of this article is that you should carefully read the type of policy form you have as well as review the listed or excluded perils.  Although the Basic and Broad Named Perils forms cover the most common causes of loss, for the most comprehensive coverage, choose Special form for personal or commercial property insurance. You do not want to discover too late that your property is not covered against a loss you have suffered.

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