The true definition of a peril is the exposure to various risks such as injuries, losses and complete destructions. Insurance companies use the word peril to explain particular risks that cause damage that the insurance contract will agree to cover. Or in other words, events that could cause damage to the property covered.
The use of the word peril is often found in homeowners insurance polices and the two main types of homeowners polices are either named peril insurance policies or all risk or all peril insurance policies.
In a named peril insurance policy, the insurance policy will only provide insurance coverage on losses due to particular perils or damages that are specifically named in the insurance policy. Since the named peril insurance policy only covers specific perils, it is usually less expensive than an all risk or all peril insurance policy.
An all risk or all peril insurance policy is an insurance policy that covers all perils except perils that are specifically excluded in the insurance policy. The all risk insurance policy is usually more expensive than the named peril policy because it is more comprehensive than the named peril insurance policy. In addition, the all risk insurance policy is the more popular choice to purchase among homeowners.
It is important to note that although an all risk insurance policy sounds like it would cover any loss, this is not the case. Since there are specific exclusions in the all risk insurance policy, there is truly no guarantee that “all risks” will be covered. The all risk insurance policy covers the most common risks that can occur or most likely perils that could damage or cause a loss to the protected property.
The most common perils in homeowners insurance include:
Fire: Something that produces a spark, flame or glow. Not smoke. Direct damage due to hostile fire is covered under the fire peril. Hostile fire is a fire that burns where it is not intended to burn such as a bed or curtains.
Lightning: Defined as natural electricity. Lightning directly damaging something or fire caused by lightning are both covered under the lightning peril. Also, damage to the electrical system or appliances in a home due to a lightning strike would also be covered under the lightning coverage but not if the electrical problem comes from the company providing the power.
Explosion: Coverage for an explosion can vary depending on the insurance policy but generally refers to explosions that originate within the covered structure but can also sometimes include explosions that originate outside of the structure and cause damage to the covered structure.
Windstorm: Damage due to wind including cyclones, tornados and hurricanes and covers the outside of the property and the inside of the property if the wind causes an opening to the inside. Does not include damage due to floods.
Hail: Damage caused directly from hail. Hail coverage to the inside of a structure is only covered if the hail itself breaches the structure and causes internal damage so if the hail enters because of an open window, the damage to the interior due to the hail from the open window would not be covered.
Riot or Civil Commotion: A riot is usually defined by three or more people causing damage to a property and a civil commotion is usually defined as damage caused by a large number of people.
Aircraft: Damage caused by any flying machines including balloons, helicopters, airplanes, spacecrafts, and self-propelled missiles.