What Are the 16 Named Perils in Homeowners Insurance?

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If you own a home, purchasing homeowners insurance is one of the smartest investments you can make. In case of an emergency, you want to ensure that you and your belongings are kept safe. But what does a typical homeowners insurance policy cover? Read on to learn more about your coverage options and the 16 named perils, or causes of loss, that are covered by most insurance policies.

What is homeowners insurance?

Whether you’re a first-time homeowner or a seasoned veteran, choosing a comprehensive and cost-effective homeowners insurance policy is certainly in your best interest. You never know what’s going to happen, and covering your bases in advance will protect your financial security and save you large amounts of stress in the long run.
Many mortgage lenders require that you purchase homeowners insurance to conduct business with them, so understanding your insurance plan options, what they cover, and which company to purchase it from is essential to your future financial success.

What does your homeowners insurance plan cover?

In the event of an unavoidable accident or emergency, homeowners insurance typically covers the cost of damages made to the dwelling itself, your personal property, and any medical payments or liabilities. There are a wide variety of insurance plans and even more insurance add-ons that you can consider to ensure you are receiving the necessary coverage for your living situation and future financial goals.
Here’s a quick cheat sheet about the four major types of homeowners insurance:
HO-1 and HO-2: Though these are often the least expensive insurance options, these coverage plans are not very broad and typically only cover the bare necessities. It can be a great option to consider when shopping around for more specialized forms of insurance or any additional insurance add-ons.
HO-3: According to a 2017 study conducted by the National Association of Insurance Commissioners, nearly 80% of participating homeowners rely on this level of coverage. These plans typically cover all damages made to your home (minus any exclusions specified in your contract) but reimburse only some types of personal property damage.
HO-5: As the broadest, most comprehensive, and often most expensive homeowners insurance option, this insurance plan ensures maximum coverage and reimbursement. It covers all damages made to your property, sans any exclusions that are present within the agreement.

Defining the 16 named perils

If you’ve purchased an HO-3 insurance policy, it’s important to understand your coverage plan. Though most damages made to the physical household are covered under this policy, it only covers the repair or replacement of your personal belongings under the 16 named perils:
  • Fire/lightning
  • Smoke/ash
  • Volcanic eruptions
  • Explosions
  • Riots
  • Windstorms and hail
  • Damage from aircraft
  • Damage caused by vehicles
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, and/or sleet
  • Water overflow or discharge (plumbing, air conditioning, and other appliances)
  • Freezing of household systems
  • Power surge damage
If you face damages due to any of these circumstances, you may be entitled to an insurance reimbursement, the amount of which is to be determined by an insurance adjuster after filing an official claim with your insurance company.

Open-risk versus all-risk policies

No matter which homeowners insurance options you choose, you must first consider whether you want open-risk or all-risk policies.
Open-risk policy: Under this policy type (typically an HO-3 or HO-5), your insurance company will reimburse you for all damage, with the exception of any exclusions detailed in your insurance agreement.
All-risk policy: This policy type (typically an HO-1 or HO-2) dictates exactly which events and circumstances will be covered in the event of an emergency. Though these plans are typically cheaper, they are very strict and are come with conditional coverage options. If it is not expressly mentioned in your contract, it is not covered, so be sure to assess this risk before selecting this policy.

Selecting a home insurance plan

Consider your financial situation: Before selecting an insurance plan, you must first figure out how much you’re willing to spend without compromising your present and future financial security.
Assess your insurance options: With a wide variety of insurance options, plans, and firms to choose from, it’s in your best interest to assess all of your options. If you’re confused about homeowners insurance and would like additional help choosing the perfect plan, you should consider talking to an insurance expert for their advice.
Compare insurance rate quotes: Like purchasing anything else, it’s important to shop around and compare plans and/or prices before settling down with a coverage policy.

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