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What is a named perils home insurance policy?

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Written by Katie Rook

What is a named perils policy?

Different home insurance providers refer to policies by different names, which can be confusing when deciding on coverage.

“Named perils” is a policy type you’ll encounter, particularly if you’re seeking a scaled back amount of coverage. It offers home insurance protection against perils specifically named in the policy. The list of perils can be as brief or as expansive as the insurance provider chooses.

Some providers also call named perils policies “standard” or “basic” policies. Occasionally, you’ll encounter named perils policies that are described as “specified perils” policies, though, technically they’re not synonymous.

Named perils policies are distinct from all perils policies, also known as “all-risk” or “comprehensive” policies.

Despite what the name “all perils” suggests, these policies protect a home and its contents against damage from all perils except those specifically excluded or listed as exclusions.

Named perils policies can be less expensive than all perils policies. However, in agreeing to less coverage, the policyholder assumes a greater risk of financial loss in the event of damage from an uninsured peril.

For example, a homeowner with a named perils policy that protects against damage from fire but not does not name wind damage will be compensated in the event of a fire but not for damage from a windstorm.

In other words, under a named perils policy, the home is only protected against perils that are explicitly named in the policy; any peril not written into the policy is not covered.

How is a named perils policy different that other types? 

There are two main elements that distinguish a named perils policy:

  • It may protect against fewer perils than an all perils policy, which tends to cover a broader range of perils and limit coverage via exclusions.
  • In the event of damage from a named peril, the onus is on the policyholder to prove the loss or damage was caused by an insured peril and that no exclusion applies.

On the other hand, those with an all perils policy must prove only that the loss or damage was to an insured property at an insured location.

It’s also possible that all perils coverage will apply to a portion of a home insurance policy, and that named perils coverage applies to another portion.

This type of policy, called broad, usually sees all risk coverage on a building and named perils on the contents.

What is an exclusion?

An exclusion removes certain losses from the policy’s coverage.

Both named perils and all perils policies can have exclusions. Regardless of the policy type you have, common exclusions are:

  • Absence from home: If the policyholder has been away from their home for a longer period than allowed in the policy, damage, loss or theft may not be covered.
  • Earthquake: If a home has been damaged by the shaking of the earth, it’s likely that it won’t be covered.
  • Existing damage: Homeowner’s insurance policies don’t usually cover property damage that existed before the policy was taken out.
  • Flooding: Many policies don’t cover damage caused by flooding of any type. When water damage is named on a policy, it doesn’t usually apply to water damage from flooding.
  • Renters: Most home insurance policies don’t cover damage or loss caused by renters staying in the home.

Frequently asked questions about named perils home insurance

What are the different types of home insurance?

Typically, there are three different home insurance policies you can choose from. Confusingly, each is often referred to by an alternate name. 

  • Comprehensive policies are also referred to as all perils or all risks policies. They provide protection against all perils, aside from those excluded. Common exclusions are earthquakes and floods.
  • Named perils policies, which are also referred to as standard or basic policies, protect against damage from perils specifically named in the policy. A named perils policy can also have exclusions such as earthquakes and floods.
  • Broad form policies combine all perils and named perils coverage with the former applying to the property and the latter applying to contents.

What are the advantages of getting a named perils policy?

The greatest advantage of a named perils policy is that you may pay less because you’re protected against fewer perils than you would be with an all perils policy. 

If you’re looking for the absolute cheapest home insurance policy, consider a named perils policy. However, we recommend that if you do so, you carefully review your policy to understand what’s covered and what’s not. 

It’s easy to customize your policy by other means. So, if you’re considering a named perils vs. all-risk policy, know that you can also reduce your insurance costs with a customized all risk policy.

What are the disadvantages of a named perils policy?

The main difficulty you might encounter with a named policy is needing to make a claim for damage from a peril that isn’t named in your policy. 

While you may pay less in premiums, you assume a greater risk by being covered for fewer perils than you would be with an all perils policy. 

There are ways you can reduce your insurance costs, regardless of policy type. While comparison shopping is the crucial first step toward saving money, bundling policies, raising your deductible and updating a property to better respond to perils are also effective savings tactics.

How much does a named perils policy cost?

It’s difficult to zero-in on the cost of any insurance policy because of how many variables go into determining cost. 

In general, you’ll pay less for insurance that offers protection against fewer perils. 

Put another way, a policy that covers more perils is likely to cost more than a policy than one that covers fewer perils.

You can reduce your overall insurance costs with the following tactics: 

  • Bundling your policies so both are held by a single provider.
  • Increasing your deductible, assuming you’re likely to have enough cash on hand in the event of an insured loss.
  • Keeping your home in good repair.
  • Installing a burglar alarm.
  • Limiting the volume of insurance claims. 
  • Mitigating potential risks within a home by installing a CO2 monitor, smoke detector and sprinkler system. 
  • Updating the home so it’s as resistant to disaster as possible.

Do named perils policies include liability protection?

Yes. All home insurance policies offer personal liability protection, which covers the policyholder if you’re successfully sued following an insured loss. 

Liability protection will cover ensuing medical and legal costs. 

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