When considering your options for home insurance, it is important to understand what each type of policy includes and excludes. Named Perils coverage, also known as ‘specified perils’, allows you the flexibility to pick and choose which perils or risks you are willing to pay for. Let’s take a closer look at Named Perils coverage and the advantages and disadvantages of choosing it.
What is Named Perils coverage?
This type of policy only provides coverage on losses to your property from hazards or events named on the policy.
A peril is an expected event that can cause damages or loss. However, not every Named Perils policy covers the same list of perils. Here are some common ones that you will find in almost every home insurance policy:
- Fire, lightning, and explosions
- Hail
- Windstorms
- Vandalism or malicious acts
- Smoke
- The impact from a vehicle or aircraft
- Civil disturbances or riots
- Falling objects
While they do cover many of the “big” perils, most named perils policies don’t offer protection against earthquakes or floods. Depending on where you live, going without flood coverage might be a costly mistake should you ever need it. If you don’t live in an earthquake or flooding-prone area, you may elect to get a Named Perils insurance policy and only declare coverage against fire, theft, or hail.
Advantages of Named Perils
- A Named Perils insurance policy only provides coverage on losses to your property and/or possessions from events or risks named on your policy.
- Theft, fire, and vandalism are events that may be declared on a Named Perils insurance policy.
- This coverage may be a less expensive alternative to ‘all-risks’ comprehensive coverage or broad form policies, which are policies that tend to offer coverage to most perils.
Disadvantages of Named Perils
- In general, Named Perils policy coverage is too narrow for most homeowners. Insurance providers only suggest this type of policy in certain circumstances, such as a house under major renovations or a vacation home, like a cottage in a remote area.
- The burden of proof is on you to support a claim for damages from a peril not listed on the policy.
- The narrow coverage carries a substantial risk of suffering an uninsured loss, which can wipe out years of premium savings.
With increasing concerns over climate change, you may not be sure if you are willing to gamble with your coverage. A recent federal government report shows that Canada’s climate is warming at a rate twice the global average. Extreme weather from climate change is resulting in millions worth of insurable damages. With the unpredictability of weather over the past decade, ensuring that you have coverage against extreme weather may be the wise choice in the long run.
Is the price right?
Because of the risk of loss, many insurers will recommend that you still consider broad form or even comprehensive coverage to save money. The price difference between Named Perils policies and comprehensive ones isn’t always that large. As a homeowner, you may find that peace of mind to be worth the extra cost.
Final thoughts on NP policies
If you want to save money and carry the financial risk of some losses yourself, consider basic or Named Perils coverage. You can customize your policy to cover only specific perils – chosen by you. Be sure to contact one of our isure brokers to discuss which perils you should have on your policy given your unique needs.
