Homeowners’ Insurance Policies – Know the Difference Between Named Peril and All Risks Coverage

Homeowners’ insurance policies are generally written to provide coverage on either a “named peril” or “all risks” basis.

A “named peril” policy covers only the specific perils described in the policy. For example, if the policy does not include fire damage as a named peril, then there is no coverage in the event of a house fire. Typical perils covered under a broad form named-peril policy include windstorm, explosion, lightning, hail, fire, and vandalism. Premiums for a named-peril policy are usually less expensive than an all-risks policy because fewer losses are covered. When coverage is written on a named peril basis, the insured (homeowner) has the burden to provide that the loss was caused by one of the named perils stated in the policy.

In contrast, an “all-risk” policy covers all losses except those specifically excluded under the policy. Some of the most common exclusions under an all-risk policy include pollution, mechanical breakdown, wear and tear, fungus or mold, sewer backups, and leakage of water over a period of time. Premiums for an all-risk policy are generally more expansive than a named peril policy because a greater number of risks are covered. Under an all-risk policy, the insurance company has the burden to provide that the damage was caused by an excluded peril.

Lender Requirements. If you have a mortgage on your home, your lender may require that you purchase an all-risk policy. Make sure to inform your lender if you file an insurance claim.

Location-Specific Coverage. Depending on where you live, you may need to purchase an additional insurance policy. For example, if you live in a flood zone, you may need to purchase a separate flood insurance policy. Other specific peril policies include earthquake, wind, and hail policies.

For more information about insurance policies, contact Ansbacher Law at 904-737-4600 or email info@ansbacher.net.