Homeowners insurance policies provide a wide array of different coverage for certain types of perils. Some policies cover more than others. When shopping for a homeowners insurance policy, you may be offered something called an open perils policy, but what is it, and how does it work?
An open perils policy is a homeowners insurance policy that is comprehensive in nature. It often covers more perils than other types of homeowners insurance policies. Some examples of open perils policies are the HO-5 and HO-3 homeowners policies and the DP-3 policy which is an open peril fire policy for landlords.
Depending on the property you are buying, an open peril policy may be beneficial. Before selecting this type of policy, though, keep reading to learn the ins and outs of an open peril policy and how it can affect you.
- Open peril policies are considered to be the most comprehensive homeowners insurance policies available.
- Open peril policies are called all-risk policies because they will cover any peril as long as it is not listed as an exclusion.
- Open peril policies tend to have higher annual premiums due to the benefits they offer
Understanding an open peril policy
When you obtain an open peril policy, you are acquiring insurance that covers damage to your home or property for all risks unless otherwise listed as a specific exclusion in the policy. For example, if an asteroid falls from space and destroys the roof of your home, this peril would be covered as long as it is not specifically listed as an exclusion in the policy.
There are a few different types of insurance policies that are considered to be open peril policies. The following are or can be considered open peril policies:
- HO-3. When it comes to dwelling and other structures, the HO-3 policy is considered open peril. It will cover anything that happens that is not a listed exclusion. The only caveat is that it is not an open peril policy when it comes to personal property coverage. The insurance company will set the parameters for this part of the policy.
- HO-5. This type of homeowners insurance coverage is the most comprehensive option available. Due to its inclusive nature, it is also more expensive. HO-5 policy covers damage to your main dwelling, other structures, and personal property caused by any peril that occurs as long as it is not a listed exclusion.
- DP-3. Landlords usually own this type of policy. It is an open peril fire policy used for rental properties and entire buildings.
These policies tend to have higher annual premiums but more benefits in case a peril was to occur. They are considered to be a luxury option when it comes to homeowners insurance plans.
Open peril vs named peril policies
Open peril policies allow the insured to submit a claim for damage resulting from any peril that is not specifically listed as an exclusion within the policy itself. On the other hand, a named peril policy will only cover perils that are listed as covered. Typically, there are 16 named perils that most homeowners insurance will cover. They are:
- Fire and lightning
- Smoke
- Windstorms and hail
- Explosions
- Vandalism
- Damage from a vehicle that you don’t own
- Damage from an aircraft that you don’t own
- Theft
- 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
If you have a named peril policy, such as HO-2, then damage resulting from one of the named perils listed above would be covered. It is important to note that if you have an even more basic HO-1 named-peril policy, you will only be covered from damage caused by 10 perils. If you have an open peril policy, it will cover all of these perils plus those not listed unless they are placed under the exclusions section of the policy.
Open peril exclusions
Open peril policies have exclusions. That is, they will not cover damage for certain listed perils. These exclusions are not as extensive as other policies, but they can make or break your decision to buy an open peril vs named peril policy. Some of the most common exclusions for open peril policies are:
- Damage from mold or fungus
- Damage from pests
- Earthquakes (separate earthquake insurance policy required)
- Flood (separate flood insurance policy required)
- Regular wear and tear
- Rust or corrosion
- Negligence
If these exclusions are not considered a deal breaker for the home and geographic location you are looking to move to, then an open peril policy will benefit you immensely. If they are a deal breaker, and the cost for separate endorsements or add-ons will be too much on top of the premium for an open peril policy, a named peril policy may be the better option.
Comprehensive coverage for uncomprehensible situations
Open peril coverage is a great option for any homeowner who can afford it. It covers a wide range of potential damage from perils that a named policy may not cover. This type of policy can give you peace of mind and ease your day-to-day worries. Next time you go to renew your policy, be sure to ask about any open peril options available.
