Homeowners insurance is, for many Americans, an automatic. At least nine out of every 10 homeowners in the U.S. say they are covered by such a policy, according to the Insurance Information Institute.
But having homeowners insurance and fully understanding what is (and is not) covered are two different things. This is where perils come in.
Named perils vs. open perils
A peril is, in essence, the event that causes the damage and ensuing loss. Flooding, for example, is a peril, as is theft. Whether your homeowners insurance will cover these events is dependent upon your policy.
However, it’s also important to understand how perils are presented within the policy itself. Broadly speaking, there are two approaches:
- Named perils: This means the policy will only cover eligible losses that occur specifically because of the listed perils. If a peril is not listed, the damage won’t be covered.
- Open perils: This is the opposite. The policy will only cover eligible losses that occur due to perils that are not listed. This is, basically, a list of exclusions.
Taking the time to understand what your policy will cover, when, and for which reasons can help if there are disputes. It still might not be enough.
Insurance companies often push the envelope
This all seems like it should be straightforward. If your policy does not list storm damage as an exclusion, and your home suffers serious rain damage, it should be covered. Too often, insurance companies like to get creative in ways they might choose to deny a homeowners insurance claim.
For example, they may argue you didn’t properly maintain your property, and that is what ultimately led to the water damage. The insurer could then deny your claim on the basis of neglect, even if the peril is technically allowed. Or the company could say you didn’t notice the damage in time and filed a claim past the deadline.
In some cases, the insurance company does this wrongly – leaving you high and dry (or, in the case of water damage, soaked). When this happens, it’s important to have someone in your corner, advocating on your behalf to help ensure the insurer doesn’t get away with this behavior.