Homeowners insurance is always a great investment when you purchase a home. In many cases, it is a requirement by the mortgage company. Keeping this in mind, as you search for a comprehensive insurance policy, it is important to know which perils are covered in standard policies. Below we have outlined the 16 named perils that all standard homeowner’s insurance policies will cover.
- There are 16 named perils that are covered by HO-2 policies.
- The most popular HO-3 covers personal property damage caused by 16 named perils.
- HO-3’s coverage for your home and detached structures is open peril. So it covers all 16 perils and more.
- Each policy type has its own exclusions and restrictions. Select a policy with the right amount of coverage to meet your needs.
The 16 named perils in insurance
Homeowners insurance exists to help cover the costs of unforeseen events that cause damage to your home and property. Even basic HO-2 policies cover your dwelling, other structures, and personal property from damage caused by 16 named perils. But most people do not know what the named perils that are covered by homeowners insurance are. Below is a list of the named perils that are covered by HO-2 policies:
- Fire and lightning
- Windstorms and hail
- Damage from a vehicle that you don’t own
- Damage from an aircraft that you don’t own
- Falling objects (like fallen trees)
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water
- Riots or civil unrest
- Freezing of household systems
- Pipe freezing
- Volcanic eruption
- Power surges
The most popular policy type, the HO-3, covers your personal belongings against the same 16 named perils. What makes HO-3 more comprehensive than HO-2 is the fact that it covers your home and detached structures on an open-peril basis. This means that HO-3 will cover your dwelling unit and other structures against all 16 perils and more. In fact, it covers any damage unless the cause of damage is explicitly excluded in your policy documents. against even more perils.
So unless you have the most basic HO-1 policy, if your home or property is damaged due to any of the named 16 perils, you will be able to file a claim which the insurance company will honor. The insurance company will then issue you a check to fix the damage as outlined in your policy.
What homeowners insurance policies cover
There is a ton of variety when it comes to homeowners insurance options, and many companies even include the option for add-ons. When selecting a policy, it is important to consider your goals for your home and your financial status to determine which insurance policy is right for you.
HO-1 and HO-2 policies
These two policies are considered to be the least expensive options. They cover just the named perils and can be useful when you are looking to add more specific endorsements or add-ons to the policy as a whole. HO-1’s coverage is limited to only 10 named perils.
This type of insurance coverage is the most popular in the US. This is because it covers damages from all perils made to the home minus any listed exclusions from the insurance company. However, it only covers personal property damage against 16 named perils discussed here.
HO-5 policy is the most all-encompassing and comprehensive option available. It provides coverage for the dwelling, other structures, and personal belongings on an open-peril basis. While this type of policy is the best, it also comes with a more expensive price tag.
Named-peril policies vs open-peril (all-risk) policies
Now that you have a better understanding of each type of policy and what it may cover, you need to determine the type of policy you select. Policies can come in either named-peril or open-peril (all-risk) forms.
Open-peril (all-risk) policies
This policy type will require the insurance company to reimburse you for all damage that occurs to the home listed in your insurance agreement, with the exception of exclusions. HO-3 and HO-5 policies protect your home and detached structures on open peril basis. HO-5 will also protect your personal property again “all risks”. This means that these policies will cover your home from all damages unless a peril is specifically mentioned in the list of exclusions. With open-peril policies, the burden of proof lies on the insurance company to prove that the damage was caused by one of the excluded cases.
HO-1 or HO-2 policies are considered to be named-peril policies. This means that these policies specifically list which events will be covered when an emergency strikes. These plans do come cheaper for homeowners, but they are very conditional and strict. If the contract does not list a circumstance, it is automatically disqualified for coverage. This provides a risk to the homeowner, as they would need to pay for the expenses themselves. HO-2 covers all 16 named perils, while HO-1 only covers 10 of them.
The burden of proof in named-peril policies
When the homeowner suffers a loss, the burden of proof lies on the insured to prove that the damage was indeed caused by one of the named perils covered by the policy. On the other hand, in open-peril (all-risk) policies, the burden of proof lies on the insurance company to ensure that the damage was not caused by one of the exclusions.
Picking the right plan
When selecting a home insurance policy, you need to make sure you weigh the pros and cons of each option. While the cheaper plans seem lucrative for their cost savings, they may end up being more expensive in the long run if a peril occurs that is not covered by that plan. Your home is an investment, and it is important to protect that investment. Find a policy with a good amount of coverage so that you are prepared when the unexpected occurs.