Insurance policies can be wide or narrow in scope. For example, an accident claim can be made on any form of collision, be it with another vehicle or a tree. In other words, accidents are specifically defined by “auto collision” or “tree collision”.
Yet, there are some items with specific names to them, especially when it comes to property insurance. These are referred to as Named Perils. They represent a specific type of damage or loss covered in a policy.
Peril Categories and Types
There are three categories of named perils. They are related to natural, human and economic events. For example, a debilitating injury or illness can fall under either human or economic peril. Conversely, a tornado would be a natural peril.
Within these categories, there are 19 events that insurance policies cover:
- The weight of ice, snow, or sleet
- Volcanic eruption
- Riots or similar civil commotions
- Falling objects
- Accidental dispersal of steam
- Accidental water overflow
- Sudden and accidental destruction of household systems via tearing apart, cracking, burning, or bulging
- Sudden and accidental damage of self or property from an artificially generated electrical current
In a named peril policy, the items listed above are used as a base to determine needed coverage. Other perils can be added as needed. The more categories added, the higher the monthly premium payment will be.
A way to cover all of the perils mentioned above is to purchase an all-risk policy, also known as a no-name peril policy. This widens the scope of coverage, so the policyholder doesn’t have to worry if they’re covered for a specific peril.
If there are any situations the insurance doesn’t handle, they’re placed on an excluded list. A separate policy would be required for the items that aren’t covered. For example, you might need separate insurance if you live in a known flood plain or near an active fault line.
Which Policy Is Right for You?
Whether you select a named or no-name peril policy depends on your needs. For the most part, standard home and auto insurance programs offer protection against a number of the items listed above. This includes damage due to fire, hail, or extra weight on the roof due to winter weather.
However, if you live in a part of the country that has excessive earthquakes or floods, then you will want to choose a named peril policy. This will provide the extra coverage required to recover from those natural disasters.