Open Perils vs. Named Perils
"Perils" is the insurance industry's name for what's covered in a property policy. There's a fundamental difference between "open" and "named" perils coverage. Open Perils provides insurance coverage for any reason not specifically excluded. Named Perils, on the other hand, provides coverage only for those Perils listed, such as fire, theft, and vandalism.
(also known as Broad Form)
(also known as "Special" Form)
This standard HO-3 homeowners policy provides Broad Form coverage on your contents (your personal property, or stuff). The policy wording reads:
1. Fire or Lightning
2. Windstorm or hail. This peril does not include loss to property contained in a building, unless the direct force of wind or hail damages the building first.
4. Riot or civil commotion
7. Smoke, meaning sudden and accidental damage from smoke.
8. Vandalism or Malicious Mischief
An "HO-3" policy includes 17 Perils, but those listed above are the most common.
Here, the burden of proof in submitting a claim is on the claimant, who must show that a loss was caused by a listed peril. Under the Open Perils form, to deny payment of a claim, the burden of proof is on the insurance company to show that coverage is excluded.
The policy wording begins with the premise that all risks of direct loss are covered, but then excludes coverage for certain things including those under "home maintenance" categories such as an old roof, rotted gutters, gradual seepage, old paint, etc., or where other insurance is needed (flood, auto, or boat insurance), or altogether uninsurable (nuclear hazard).
"Open Perils" wording begins as follows:
"We insure against risks of direct loss to property...if that loss is a physical loss to the property; however we do not insure loss..." ...caused by risks associated with general home maintenance (wear and tear), unusual hazards (theft to a dwelling under construction, or vandalism to a home left vacant for over 30 days), and others as listed above.
(Note: this is a paraphrased, partial list. See your homeowners policy for the complete wording)
Notice how coverage is provided wherever it’s not specifically excluded. Thus, to deny payment of a claim, the burden of proof is on the insurance company to show that coverage is excluded.
For both the HO-3 and HO-5, this is how coverage on dwellings and out-buildings works.
Coverage on your contents is on a "Named Perils" basis under the standard HO-3. The HO-5 policy, however, provides this open perils coverage to your "contents" too, which is why it is a better policy when available.
A good real life example illustrating the difference between Named Perils and Open Perils happened to my mother: She returned home from grocery shopping one day and noticed the diamond in her engagement ring was gone. It hadn't been stolen, hadn't been destroyed by fire, hadn't been vandalized, or any of the other "named" perils. But it was gone, and she wanted it replaced. Since my father was in the insurance business, he had purchased "open" perils coverage on the ring separately, through a valuable items policy (you couldn't buy an HO-5 back then). The diamond was replaced with insurance, since there was no exclusion for "stone falling out of setting", which is what probably happened. You can get the same open perils coverage today on your contents with an HO-5. You still should be aware of dollar limits for jewelry, watches furs, and similar items, as outlined on our HO-5 comparison page.
Overall, 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. So if something happens to your personal property, and the peril causing damage isn’t listed, the HO-3 isn't going to be any help.
Which coverage would you rather have on your personal property? "Open" or "Named"?
We recommend the HO-5 form if you're eligible. For a comparative list of HO-5 policies available through our office, click our HO-5 comparison page.