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Perils in insurance are defined as any event, situation, or incident due to which damage has been done to the insured property or asset.
It is very important for insurance owners to understand what are the perils that have been covered under their policy. This is to get a clear idea about when to reach your insurance company to get the compensation.
Let’s know about perils in detail.
No insurance policy provides coverage for all types of losses. Perils covered differ from policy to policy and insurer to insurer. There are two types of coverages that are provided under insurance policies namely, Named perils and Open perils or All risk.
Named Perils policies provide broad and basic coverages. The events or perils that are to be covered under such policies are specifically mentioned in the insurance contract.
Here is a list of the perils that are usually covered under such policies:
These are the losses that are covered under named perils insurance policies. Except for these, it does not provide protection against any other risks which might also lead to problems for the insured.
Under an open perils policy, all losses are covered except for those listed as exclusions in the insurance contract. It is just the opposite of how named perils policy works. In an open perils policy, more losses are covered as compared to the named perils policy. In a few policies, you can also opt for additional protection against any excluded peril by paying an extra fee.
Exclusions under these policies may vary from state to state, policy to policy, and insurer to insurer. Therefore, it is very necessary to have knowledge about the perils that are excluded from your open perils policy.
Often perils and hazards are the two words that are used interchangeably, but in the insurance industry, perils in insurance and hazards are considered to be two completely different things. Perils are the events that are the cause of the damage whereas hazards are the factors that lead to perils.