You probably spent a lot of time picking out the perfect home. Selecting the right homeowners insurance policy also requires attention to detail. Not all policies are the same. It’s not just the deductibles, limits and premiums that can vary. The types of claims covered also change depending on the policy. A high limit won’t do you any good if your claim is excluded, so understanding what your policy does and does not cover is absolutely essential.
But again, there’s variation. How your policy will list what’s covered and what’s excluded depends on the type of policy you have. There are two main types: named perils and all-risk.
Which Is Better?
If you’re thinking that all-risk homeowners insurance must cover all risks, you can be forgiven for your assumption. It’s a common myth, and given the name, it’s easy to see how it came about. However, all-risk homeowners insurance does not cover all risks. Instead, it covers all risks except for the ones listed as exclusions in the policy documents.
Named perils homeowners insurance, on the other hand, covers only those risks listed as covered in the policy documents. In other words, both policy types can be expected to cover some risks and exclude others. The difference lies in whether the covered or excluded risks are the ones listed.
Given this, it’s difficult to say which coverage type is better. There are, however, pros and cons to each type.
Named perils homeowners insurance policy have very clear limits. They cover only what is named in the policy. Given this, the coverage is clear. As a result, the premiums may be comparatively affordable, as well.
However, you get what you pay for. In this case, this means you’re paying for certain coverages, and that’s all you get. While these may include the biggest risks you face, if other less expected risks arise, you won’t have coverage.
With all-risk homeowners insurance, you have coverage for everything that isn’t specifically excluded, including risks that neither that the insurer nor the insured ever anticipated. This means that coverage is often broader than the coverage provided by named perils insurance policies. Given this, it can also be more expensive.
If damage occurs, you can file a claim as long as it isn’t specifically excluded. You do not have to prove that it is covered; to deny a claim, the insurer would have to prove that it isn’t covered.
However, this benefit can be negated if important perils are excluded. It’s important for homeowners to read the policy carefully and to understand the limits of their coverage. Would you like a homeowners insurance review? Find a FICOH agent here.