What's the difference between all-risk and named perils insurance?
I'm shopping for home insurance and these two terms keep popping up online. How do they differ?
These terms refer to the types of events you are covered and protected from. The meaning of “all-risk” is right in the name — you are covered for all risks, except certain things that are excluded from your policy. The exclusions are listed in your policy; they are typically things like earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, and nuclear hazard. Some of these types of losses can be covered by purchasing specific endorsements.
“Named perils” means you are only covered for the perils that are listed in the pages of your policy, nothing more. The most common named perils are fire or lightning, hail, riot, explosion, aircraft, smoke, vehicles, falling objects, and theft.
There are pros and cons to both options. All-risk insurance offers more protection but is much more expensive; named perils insurance is cheaper, but as you can see there isn’t as much coverage. Your insurance agent will be able to advise you on which policy is right for you.
And keep in mind that if you are working on your home and fixing it up, you should keep your insurance agent in the loop. Your insurance needs may change and you can upgrade your policy to make sure you are properly covered.
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