What are perils and hazards?

In the world of insurance, a “peril” is an event or circumstance that could result in property damage. Your homeowners, condo, or renters policy contains a list of covered perils, such as fire, lightning, and vandalism. If a covered peril causes damage, your insurer may pay to repair, replace, or rebuild your home or property, minus your deductible. A “hazard” increases the chances of a peril occurring. The term “hazard insurance” has been made popular by mortgage lenders when referring to dwelling coverage because they typically require the coverage, at a minimum, to protect their interest in the home’s structure.

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What's the difference between a peril and a hazard?

A peril is the cause of the loss and a hazard increases the likelihood of a peril happening. Perils and hazards aren't synonyms, but they're sometimes mistakenly interchanged when discussing homeowners insurance.

Example:Suppose a fire begins in your chimney and destroys your home. In that case, the fire is the peril and the dirty or defective chimney is the hazard.

A hazard is not the same thing as “hazard insurance,” which is a term that mortgage lenders often use to describe dwelling coverage.

What is a covered peril?

A covered peril is an event that your insurance may cover. When you file a claim for a covered peril — such as a lightning strike, fire, theft, vandalism, and wind or hail damage — your insurance company may reimburse you for the damage, minus your homeowners insurance deductible. Your dwelling coverage, which protects your home’s structure against damage, might have different covered perils than your contents coverage would in a policy.

Examples of perils

Perils can range from weather events to other events like theft or vandalism. Here are some common perils listed on standard homeowners insurance policies:

  • Fire or lightning: Includes damage caused by lightning or an event caused by a lightning strike, such as a fire
  • Weight of ice, snow, and sleet: Refers to snow accumulation or an ice dam that causes damage to your home, such as a roof leak
  • Windstorm & hail: Includes damage caused by a wind or hailstorm
  • Theft & vandalism: Refers to stolen belongings and willful damage to your property
  • Accidental water/steam overflow or discharge: Refers to water damage from a sudden break or blockage in your plumbing or HVAC system
  • Falling objects: Includes damage from a tree that falls on your house
  • Power surges: Refers to sudden and accidental damage from an artificially generated electrical current or power surge

Named perils vs. open peril

Named perils and open perils refer to the different types of coverage provided in your homeowners insurance policy.

What is a named peril?

"Named perils coverage" means your policy only covers specific or “named” perils listed in your policy. If you file a claim, the damage must result from a listed peril in order to be covered. This type of policy limits the number of events or types of damage your insurance may cover when you file a claim. Coverage for your contents is generally provided on a named peril basis.

What is open peril coverage?

"Open perils coverage," also called "all risks coverage," means you're covered against a peril unless your policy specifically excludes the loss. While you'll often pay more for a homeowners insurance policy with open perils coverage, this coverage is typically standard for your dwelling coverage. Remember that you usually won’t purchase an open peril policy with renters insurance, as contents are usually covered on a named peril basis.

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