Perils: What's Covered And What's Not

In insurance, a peril is an unexpected event that causes damage or loss to your property. This includes events such as fire, lightning, wind, theft, and vandalism. Perils are covered by all types of home insurance and can be categorised as either 'covered perils' or 'uncovered perils'. Covered perils are events that are included in your policy, meaning your insurance company will reimburse you for any damage caused. Uncovered perils, on the other hand, are not covered by your policy and you will not be reimbursed for any damage they cause.

Natural disasters (e.g. hurricanes, tornadoes)

Natural disasters, such as hurricanes and tornadoes, are considered perils in insurance. Perils are insurance jargon for destructive events that cause damage or destruction to property or personal belongings. In the context of homeowners' insurance, a peril is an event that can cause loss or damage to a home.

Standard homeowners' insurance policies typically exclude coverage for damage resulting from natural disasters such as earthquakes, floods, mudflows, landslides, and tsunamis. However, special catastrophe insurance policies are available to provide coverage for specific natural disasters, including floods, hurricanes, tornadoes, earthquakes, and volcanoes. These policies can be purchased separately or as an endorsement to an existing homeowners' insurance policy.

Homeowners in areas prone to natural disasters may need to purchase additional coverage to protect their homes and belongings. For example, flood insurance can be obtained through the National Flood Insurance Program (NFIP) or private providers, while windstorm and wildfire coverage may be added through endorsements or state-funded insurance programs.

It is important to note that not all natural disasters are covered under standard homeowners' insurance policies, and exclusions may vary by state. For instance, in California, damage caused by earthquakes is typically excluded from homeowners' and renters' insurance policies. Therefore, it is crucial for individuals to carefully review their insurance policies to understand what perils are covered and excluded.

When purchasing homeowners' insurance, it is recommended to consider the specific risks associated with the location of the property. For example, homes in areas vulnerable to hurricanes, tornadoes, wildfires, or floods may require additional coverage beyond what is offered in a standard policy. By understanding the potential perils, individuals can ensure they have adequate protection in the event of a natural disaster.

Vandalism and theft

Vandalism and malicious mischief insurance is included in most basic commercial and homeowner insurance policies. It is particularly important for properties that are unoccupied during certain periods of the day, such as churches and schools, as they are more likely to be targeted by vandals.

Theft is also a common peril covered by insurance policies. Most insurers will cover stolen belongings, whether they are taken from your home or a hotel room. However, certain expensive items like jewelry, firearms, or art may only be insured up to a limited amount.

It is important to note that insurance policies may vary, and it is always advisable to carefully review your specific policy to understand the coverage, exclusions, and any additional precautions that may be required to ensure protection against vandalism and theft.

Fire damage

Most homeowners insurance policies include fire insurance, which provides coverage for the interior and exterior of the home, as well as any assets kept on the property. Fire insurance can pay the policyholder on a replacement-cost basis or an actual cash value (ACV) basis for damages. This means that if a home is considered a total loss, the insurance company may reimburse its current market value. The insurance typically provides a market value compensation for lost possessions, with the total payout capped based on the home's overall value.

In addition to fire damage, homeowners insurance policies typically cover a range of other perils, such as wind damage, hail damage, theft, and vandalism. However, it's important to note that not all perils are covered by standard homeowners insurance policies. For example, flood insurance typically needs to be purchased separately.

When purchasing home insurance, it's important to carefully review the policy to understand what perils are covered and what exclusions may apply. Homeowners may also want to consider purchasing additional coverage for valuable items or in the event that their property is located in an area prone to natural disasters.

Water damage

• Accidental leaks, such as leaking plumbing or an appliance leak (e.g., a broken washing machine or dishwasher).
• Burst pipes, including frozen pipes that burst, unless the homeowner neglected to keep the home properly heated.
• Ice dams that cause sudden damage, unless they were caused by a lack of maintenance.
• Water damage after a fire, such as water used to extinguish the flames.
• Water damage from a roof leak, such as damage from a storm or a fallen tree.
• Water damage from storms, such as heavy rain or hail.

However, there are several types of water damage that are typically not covered by standard homeowners insurance policies:

• Flood damage, including hurricanes, tsunamis, storm surges, and overflowing rivers.
• The cost to repair or replace the source of the water damage, such as a broken dishwasher or washing machine.
• Water damage due to lack of maintenance or negligence, such as failing to repair a known plumbing problem or maintain proper heat during freezing temperatures.
• Water damage from "earth movement," such as earthquakes, landslides, or mudslides.
• Water damage from intentional acts, like setting a fire to a home or purposely turning off the heat.
• Water damage from leaks from a swimming pool or other structures.
• Water damage from seepage or leaks through a foundation.
• Water damage from a sump pump failure or related equipment.
• Water damage that backs up through a sewer or drain, unless special coverage for this problem is purchased.

It is important to carefully review your insurance policy to understand what types of water damage are covered and excluded.

Damage from aircraft/vehicles

Damage from aircraft and vehicles is a peril that is covered in most standard homeowners insurance policies. This type of peril is included in the "Perils Insured Against" section of insurance policies and covers damage caused by any flying machines, such as balloons, helicopters, airplanes, or spacecraft. It is important to note that coverage for damage from drones may vary depending on the insurance provider.

In the context of aviation insurance, aircraft liability coverages are crucial. These coverages protect the pilot against liability suits arising from the operation or ownership of the plane. While basic aviation policies may not automatically cover passenger bodily injury hazards, this coverage can usually be purchased as an add-on. Additionally, liability coverage for admitted liability and passenger liability is available, providing medical expenses and voluntary settlements regardless of liability.

When it comes to vehicle insurance, there are two main types: liability-only and full coverage. Liability-only insurance covers the financial losses of others in the event of an accident caused by the insured, while full coverage also includes protection for the insured's own vehicle and may include comprehensive coverage for non-collision-related incidents. Collision coverage is typically optional but may be required by lenders if the vehicle is leased or financed.

It is worth noting that aircraft and vehicle perils are distinct from each other. Aviation insurance focuses on physical damage (hull) and liability coverage, while vehicle insurance primarily addresses liability concerns. The risks and costs associated with aviation insurance are generally much higher, and the perils covered are very specific to aircraft operations.

To summarise, damage from aircraft and vehicles is a recognised peril in insurance, particularly in the context of homeowners insurance. This coverage protects against financial loss due to damage caused by aircraft and vehicles, with specific considerations for aviation and vehicle insurance policies.

Frequently asked questions