Fire, lightning, windstorm, hail, explosion, riots, aircraft or vehicles, smoke, vandalism or theft; these are just a few of the many things that can cause damage to your home. These are also some of the most common forms of “named perils”. A peril is the term the insurance industry uses to describe the risks that can cause a loss. “Named Perils” are the types of events, listed within each insurance policy, that are covered by a property policy.
There are two types of peril policies: Open, and Named. Named Perils (also known as “Broad Form”) provides coverage only for those Perils listed. Named Peril policies are often less expensive, but only provide coverage for specific instances. So, you’re saving more money, but you are carrying more risk because if an instance occurs that is not listed in your Named policy, you will not receive any coverage. The most common Named Perils policies will cover the instances I listed above. However, you can choose to include or exclude specific Perils to customize your policy. For example, if you live in the middle of a desert and you’re not worried about flooding. Perhaps you would purchase a peril policy that covers fire and theft only. This type of policy may work well for homeowners who live in low-risk areas, or feel comfortable managing their own risk.
Open Perils, (also known as “Special Form”) is fundamentally different from Named Perils. While Named Perils spells out what is covered, Open Perils specifically spells out what is not covered. Generally, Open Perils will cover most risks, so long as they are not associated with general home wear and tear, unusual circumstances or other specifically excluded situations. Open Perils will include most of the common Named Perils options, unless your policy specifically excludes them. For example, your Open Peril policy may specifically exclude hail if you live in a hurricane zone, or may exclude fire if your home is entirely made of wood.
So, to put these two policies in perspective, let’s look at an example of how these policies would work. Mary came home from the grocery store to find the diamond in her wedding ring was gone. Her house was not vandalized; nothing was harmed or missing except for her diamond. There was no fire, no wind, no explosions or damage to the house. If she had a Named Perils policy, her ring would probably not be covered because “loss of valuable items” is not a named peril in most policies. However, an “open perils” coverage policy would include the ring as long as there was no exclusion for “loss of valuables”, which is what happened. You should be aware of dollar limits for jewelry, watches, furs, and similar items, as outlined in your homeowner’s policy.
In summary, Open Perils provides protection to you for any reason not specifically excluded. Named Perils, on the other hand, provides coverage only for those Perils listed, or specifically “named”, in the policy.