Named Perils Policy vs All-Risk Policy
When choosing disaster insurance, you basically have two choices, a named peril policy or an all-risk policy. The primary difference between them is that one type of policy covers what is “named” (included) in the policy while the other covers what is not included. In short, “named perils” are less expensive and less comprehensive than “all risks” coverage. Let’s look further at the Named Perils Policy vs All-Risk Policy debate to see what else is different in these two policies.
A named peril policy is often a good choice for anyone looking for homeowners insurance quotes whose homes are located in an area frequently hit by natural disasters such as hurricanes and tornadoes. Such a policy spells out the specific events for which you are covered. The cost of the premiums will depend on the location of your home and the likelihood of the specific peril(s) occurring. Anything not specifically named in such a policy is not covered.
And don’t forget that the “basic” fire, lightning and removal ARE included already. Here is an example list of the perils insured against on a named perils policy (remember the acronym WHARVVES):
- Wind: Hurricanes or tornadoes.
- Hail: No explanation needed.
- Aircraft: Watch the news. This happens.
- Riot: Type “Los Angeles Riots” into Google.
- Volcanic Action: Flood Insurance? No. Earthquake? No. Volcano? Yes.
- Vehicles: Cars hit houses. Ask Billy Joel.
- Explosion: Ever heard of gas utilities?
- Smoke: More damage is caused by smoke than fire assuming the whole house isn’t burned down.
Insurers may add additional perils or exclude perils as they see fit. You might want to ask one of our agents to add or exclude theft, vandalism and malicious mischief to their list of covered perils.
The more expensive and more comprehensive all risk, or special form policy, covers your home against EVERYTHING that can damage it…other than what is specifically excluded in the policy.
Here is a list of common exclusions on a special form policy:
- Earth Movement
The real difference here is where the responsibility falls for determining if coverage is available. On a named perils coverage form, you must prove the “loss” was a result of a “covered peril,” assuming there is a dispute.
But don’t picture having to stand in front of a judge with pictures of your burnt house trying to explain that a fire occurred. If the cause of loss is obvious…it’s obvious. Nothing to worry about there!
On an all risks policy, the insurer must prove the cause of loss was SPECIFICALLY excluded in order to deny coverage…again…only if there’s a dispute and the cause of loss is not obvious.
For most homes, an all-risk policy will suffice. However, only you can determine your needs based on your location and the property and equipment you need to protect. The advantage of an all-risk policy is that it covers you in the event of a disaster you did not predict happening, and many unusual disastrous events fall into this category.
Our insurance professionals always try to point out that the most comprehensive coverage can be added to almost any policy for less than a third of the cost to purchase an iPhone. Take your pick as to what’s more important. We hope this fully answers the Named Perils Policy vs All-Risk Policy debate!