Home insurance is like a superpower for your home, belongings, and other structures that protects against perils (anything that can cause damage).
Open peril coverage is when a home insurance policy explicitly lists all the risks it doesn’t cover, making everything else fair game. Alternatively, named peril coverage is when a home insurance policy lists every risk it does cover.
Each year, about one in 20 insured homes has a claim, so it’s important to know which type of policy you have and which perils you have protection for.
What Is Open Peril Coverage?
Open perils coverage is also sometimes called “all risk,” “all perils,” or “special perils.” An open perils policy covers any peril that isn’t explicitly excluded in the policy. Some common exclusions on an open peril basis include floods, earthquakes, normal wear and tear, infestations, and government actions.
What Is Named Perils Coverage?
Named perils coverage, sometimes called “specified peril coverage,” protects against the perils the policy lists as covered. A named peril policy can provide basic or broad coverage.
Basic coverage protects you from 10 listed perils, and broad coverage protects against 16 listed perils. Fortunately, broad named-peril coverage is far more common.
The 16 perils it covers are:
- Wind and hail
- Fire and lightning
- Smoke
- Explosions
- Volcanic eruption
- Weight of ice, snow, or sleet
- Frozen plumbing and pipes
- Electrical current
- Falling objects
- Damage by aircraft
- Damage by vehicles
- Civil disturbances
- Theft
- Vandalism
- Sudden and accidental cracking or damage to home systems, like water heaters or HVAC.
- Sudden and accidental water damage from home systems, like plumbing, automatic fire-protection sprinklers, or household appliances.
If you experience any one of these 16 threats, your insurance kicks in and covers you up to your policy limits (once you pay your deductible).
Types of Home Insurance Policies and Their Peril Coverages
There are eight types of home insurance policies based on the type of dwelling they cover and whether they provide open peril insurance, named peril insurance, or a combination.
HO-1 Policy
An HO-1 policy offers only basic named-peril coverage for your home and belongings, making it the least protective. It’s rare for homeowners to choose this policy, and it’s not recommended.
HO-2 Policy
An alternative to the HO-1 is the HO-2 policy, which offers broad named-peril coverage for your home and belongings. Remember that broad named-peril coverage includes all 16 of the named perils listed above.
HO-3 Policy
An HO-3 policy is the most common type of policy and offers a combination, providing open peril coverage for your home and broad named-peril coverage for your belongings. At OpenHouse, we offer the same coverages as an HO3 policy, only you can customize it by removing and adding the coverages you want for the protection and premium that’s best for you.
HO-5 Policy
HO-5 home insurance policies offer open peril coverage for one’s home and personal property in exchange for a high premium.
HO-6 Policy
An HO-6 policy is for condos, providing coverage for a unit from the walls inwards. These policies provide broad named-peril coverage for the parts of the dwelling it covers and for personal property.
HO-7 Policy
An HO-7 policy is only for mobile and manufactured homes. This policy covers open perils coverage for the home and broad named-perils coverage for belongings.
HO-8 Policy
Another policy for a specific kind of home, HO-8 policies are known to provide “modified coverage” for old buildings with replacement costs that are higher than their market value. Like an HO-1, it offers basic named-peril coverage for the dwelling and belongings.
What About HO4?
If you noticed the policies are numbered and that HO4 was missing from the list, good catch. HO4 is a renters policy, so it’s not technically a home insurance policy—even though it’s counted as one of the eight.
Getting Coverage for Your Non-Covered Perils
Named peril and open peril policies both have perils they don’t cover. They may be excluded on your open perils or not automatically included on your named perils, but that doesn’t mean you can’t get the extra coverage you need.
In these instances, there are often standalone policies you can purchase or endorsements (policy add-ons) you can get for your existing policy.
Here are the most common coverages you’ll need standalone policies or endorsements for.
Flood Coverage
If you have a mortgage and live in a FEMA-designated high-risk flood zone, like zone AE, your lender requires you to have flood insurance. FEMA stands for The Federal Emergency Management Agency, and you can use their flood map to look up your risk level. If you don’t have high risk but live in a flood-prone state like Florida, you can still purchase flood insurance for peace of mind.
Where to Get It: The National Flood Insurance Program
Sinkhole Coverage
Natural or human-made sinkholes can collapse the ground and ruin your property. If you live in a state where sinkholes are possible, you may want sinkhole coverage.
Where to Get It: Ask your insurer if you can add sinkhole coverage to your policy. This is a standard offering in sinkhole-prone states like Florida. If your insurer doesn’t have this option, you can look up standalone policies in your state.
Earthquake Coverage
Earthquakes are most common on the West Coast of the United States, with California topping the list. Because of this, California law requires home insurance companies in California to sell earthquake coverage. If you don’t live in California, you’ll want to check out the likelihood of earthquakes in your state according to the USGS (United States Geological Survey) and assess your comfort level with the risk.
Where to Get It: If you live in California, ask your insurance provider or visit the California Earthquake Authority. If you live elsewhere and decide to get earthquake insurance, look up standalone policies in your state.
Water Backup Coverage
Water backup coverage protects you when water backs up into your home from a drain, sump pump, or sewer. This type of water peril doesn’t fall under flood insurance or sudden and accidental water damage. The good news is that water backup is an endorsement you can add to most home insurance policies.
Where to Get It: Ask your insurance provider to add water backup coverage to your existing policy.
Scheduled Personal Property
While home insurance does cover your personal property, it can only cover it to the maximum limit set for your belongings. This limit is usually a percentage of your total dwelling coverage and may not be high enough for precious items like jewelry, art, or collections. Scheduled Personal Property (also called Additional Valuable Items) is a way to add higher coverage limits for these items so that they’re fully protected.
Where to Get It: Ask your insurance provider how to update your current policy to include your extra valuable belongings.
Named Perils vs Open Perils: Which Policy Should You Get?
As a homeowner, all your home insurance choices come down to balancing coverage and cost. Your goal is the right amount of coverage to protect your home at a price that doesn’t drain your pockets.
And in the same way it’s possible to be underinsured for the sake of saving, it’s possible to be overinsured and spending more than necessary.
An open peril policy usually offers broader coverage for a more expensive premium, and a named peril policy usually offers a standard list of coverage for a more affordable premium.
But keep in mind that the most common type of policy is one that offers a combination of open peril coverage for your home and broad-named peril coverage for your belongings, creating a nice balance for homeowners.
You can also get policy add-ons to fill coverage gaps, and some insurers offer more add-on options than others. (For example, with OpenHouse, you can add extra coverage for animal liability, HOA, ordinance protection, water backup, golf carts, and more.)
Many fully open peril policies come pre-packaged and force higher premiums for coverage not all homeowners need. As a result, a customizable policy can be optimal for those who want the option to choose the coverages they pay for.
Wrapping Up: Named Peril and Open Peril FAQs
Is a peril the same as a hazard?
No. An insurance peril causes loss or damage, while a hazard increases the chance of a peril occurring or damage resulting when a peril occurs. For example, a house fire is a peril, but smoking or having frayed electrical wiring is a hazard that increases the chance of a fire happening.
What is an example of an open peril?
An example of an open peril would be if a tree fell on your house and your policy didn’t exclude falling objects. In this case, your insurer would cover the loss after you paid your deductible. Alternatively, if you had termites and infestations were excluded, your insurance wouldn’t cover it.
What is an example of a named peril?
Say your home insurance lists or “names” all the perils it covers—like fire, wind, hail, theft, falling objects, and so on. All of these would be considered named perils and are covered if they damage your home or belongings.
What is a basic named peril?
A basic named-perils policy covers only ten perils. This small amount of coverage is uncommon and not recommended. The perils it includes are wind and hail, fire and lightning, smoke, volcanic eruption, explosion, theft, vandalism, civil disturbance, damage from aircraft, and damage from vehicles.
What is a broad named peril?
A broad named-peril policy protects against a wide range of perils. It covers the ten found in a basic policy and expands them to include frozen pipes; the weight of ice, snow, or sleet; electrical current; falling objects; sudden or accidental water damage, and sudden or accidental damage to home systems.
What is excluded on an open perils policy?
An open perils policy can exclude any number of perils, but those most commonly excluded are:
- Flooding
- Earthquakes
- Infestations
- Power outage
- Pollution
- War
- Nuclear hazards
- Government seizures or destruction
- Market loss
- Rust or corrosion
- Normal wear and tear
What does all risk insurance not cover?
All risk or all peril insurance is another word for open peril insurance. The term all risk is misleading because an all risks insurance policy doesn’t cover all risks or perils—only the risks it doesn’t list as excluded. What is excluded changes from policy to policy.