What Are Named Perils in Home Insurance?

Home insurance policies cover sources of damage to your home in two ways — named perils coverage and open perils coverage. Named perils policies cover only the events stated by “name” in your policy. This coverage type provides more limited protection since it doesn’t include every event that might threaten your home.

But a named perils home insurance policy is usually cheaper. It can be an excellent option for some homeowners, but it’s not the right fit for everyone.1

Here’s how to decide whether named perils coverage makes sense for your home.

Common named perils

Named perils vary from one policy to the next, and that’s why it’s important to understand the details of your coverage. The good news is that there are some common named perils, and most of them fall into three categories: weather-related, human-related, and accidental.

For example, let’s say a small kitchen fire destroys your cupboards and flooring. Your homeowners policy includes accidental fires as a named peril, so your policy covers the cost of repairs.

Not every home insurance policy covers all the common named perils. Some insurance companies allow you to choose which perils your policy includes. But other policies only have pre-selected coverages with specific named perils.

Here’s some additional information about the most common named perils and the losses covered.

Common exclusions in named perils policies

Although most insurance policies don’t cover all the most common perils, each usually covers at least some. If your policy doesn’t include a specific named peril, you can add it or find an insurer that offers it.

Regardless of the insurer or coverage, named perils policies typically exclude the following events and items:

Benefits of named perils policies

Named perils policies can be helpful for some homeowners, especially if you want to save money and have more control over your coverage. Here are the biggest benefits of using this type of policy:

• Lower cost: Named perils policies are usually cheaper than open perils policies. Because the policies don’t cover every possible event, they’re less expensive for insurers and, as a result, cost less for the homeowner.

• Straightforward coverage: Named perils policies are straightforward. The policy covers the listed perils. You don’t have to guess about what your coverage includes.

• Additional control: Some insurers allow homeowners to customize named perils policies by adding or removing “named” events with a rider.2

Drawbacks of named perils policies

Even though a named perils policy can be a great option for some homeowners, it’s not the right choice for everyone. Here are some drawbacks to consider as you decide:

• Gaps in coverage: Named perils policies offer less extensive protection than open perils policies, also known as all-risk policies. Because of that, you might have gaps in your coverage. Even if you think you have the coverage you need, an unexpected event might surprise you.

• Requires extra research: Understanding your insurance coverage is always important, but it’s even more critical with a named perils policy. The policies don’t cover every event, so you must read your contract closely to ensure you have the coverage you need.

• Lenders might not approve: Some mortgage lenders require homeowners to have open perils policies that provide more coverage.

Named peril vs. open peril policies

Insurers offer two types of homeowners policies when it comes to what they cover: named perils and open perils. An open perils policy covers any event the policy doesn’t specifically exclude, making it a more comprehensive option. These policies offer broader coverage and are a popular pick with homeowners. Named perils policies, meanwhile, list the covered events, so they tend to cover fewer things.

As you decide whether an open perils policy is the right pick, consider these pros and cons.

Most insurers offer several types of homeowners insurance with different levels of coverage. Here’s how to determine whether each policy includes open perils or named perils coverage for your property.

Named perils FAQs