Generally, covered properties are divided into four separate categories. The definitions of the property and the extent of coverage vary by state, company, and product. So it is important for the consumer to understand the definitions of the covered property. The four separate categories for your home, as defined by insurance companies, are:
- Dwelling –The structure of the house is considered a covered property.
- Other Structures –These are structures that are separate from the house or connected to the house by a fence, wire or another form of connection, but not otherwise attached to the dwelling, such as a tool shed or detached garage.
- Personal Property –The contents of your home are your personal property. This includes furniture, appliances, and clothing. Not all personal property is covered. Items more appropriately covered under different forms of insurance may have limited or no coverage for the loss. These items include, but are not limited to, money, jewelry, and firearms.
- Loss of Use –When a loss occurs due to a covered peril and the dwelling becomes uninhabitable, the cost of additional living expenses are covered. Reimbursement of additional living expenses covers the cost to the insured for maintaining a normal standard of living.
“Open Perils” and “Named Perils” Coverage
A peril, as referred to in an insurance policy, is a cause of loss, such as fire or theft. Coverage can be provided on an “all perils” basis, or a “named perils” basis. Named Perils policies to list exactly what is covered by the policy, while Open Perils (or All Perils) policies will list what is excluded from coverage. Named Perils policies are generally more restrictive. A dwelling policy usually provides coverage for both the dwelling and contents on a named perils basis, while a homeowners policy usually provides coverage for the dwelling on an all perils basis, and for the contents on a named perils basis.
Package Versus Peril-Specific Coverage
A package policy provides coverage for multiple, but usually not all perils. A homeowners policy, for example, is a package policy typically providing coverage for the perils of fire, lightning, and extended coverage. Extended coverage includes coverage for the perils of windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, vandalism, malicious mischief, theft, and breakage of glass. Some policies, such as earthquake or flood policies, provide coverage for specific perils that are often excluded in package policies. Fire and Sprinkler leakage damage as a result of an earthquake may be covered by a standard homeowners policy. To purchase the most appropriate insurance, it is important for you to consider what additional perils you may face. And, you should always verify what is covered in your specific policy.