"Perils" is the insurance industry's term for what's insured against in a property policy. There's a fundamental difference between "Open" and "Named" perils coverage:
The table below gives real life examples.
(also known as Broad Form)
(also known as Special Form)
This standard HO3 homeowners policy provides Broad Form coverage on your contents (your personal property, or stuff). The policy 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 HO3 policy includes 17 perils, but those listed above are the most common.
Here, the burden of proof in submitting a claim is on you, 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 language begins with the premise that all risks of direct loss are covered, but then excludes coverage where other insurance is needed (flood, auto, or boat insurance), or altogether uninsurable (nuclear hazard) and.those things falling under home maintenance categories such as an aging roof, rotted gutters, gradual seepage, old paint, etc.
"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 own homeowners policy for the complete wording)
Notice how coverage is provided wherever it’s not specifically excluded. To deny payment of a claim, the burden of proof is on the insurance company to show that coverage is indeed excluded.
For both the HO3 and HO5 policy, this is how coverage on structures, dwellings and out-buildings works, too.
Coverage on your contents (also known as personal property - your "stuff") is on a Named Perils basis under the standard HO3.
The HO5 policy provides Open Perils coverage for your contents too, which is why it is a better choice 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, nor been subject to 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 HO5 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 HO5. 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. We recommend the HO5 form when available. For a comparative list of HO5 policies available through our office, click HERE.
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