When you are shopping for home insurance there are a number of different policies you can choose from. There are basic policies that only cover your home from a few different perils and there are advanced policies that will completely replace a home no matter what the disaster. It is all dependent on the policy and agency you choose to purchase the home insurance from. When you choose your insurance policy it is important that you find one that fits your needs and your budget. There is no use in purchasing flood insurance if you live somewhere where flooding will never affect your home.
When looking for a policy there are two broad types. Open peril insurance policies and named peril insurance policies. Both types of policy will cover your home for damages, theft, and even liability. The difference between the two is the number of perils that the insurance policy covers. One of the policies covers your home and property for much more than the other.
Named Peril Home Insurance Policy
Named peril home insurance is a type of insurance policy that covers specific perils. These perils are typically the most common cause of damage to homes. Fire, tornadoes, wind storms, and theft are usually the main perils covered by named peril insurance policies. HO-1, HO-2, HO-4, HO-6 and HO-8 policies are all named peril home insurance policies. Any perils that are not specifically mentioned in a named peril policy will not be covered by the policy.
Open Peril Home Insurance Policy
Open peril home insurance is a type of insurance policy that covers all perils. The policy will name the specific perils that are not covered by the policy and if the peril is not mentioned in the policy, it is covered. These are the most popular type of home insurance policy due to the fact that they offer the broadest spectrum of coverage for buyers. The only two home insurance policies that are open peril policies are the HO-3 and HO-5 policies. These two policies are very similar. The only difference between these two policies is that the HO-5 policy typically replaces the full value of damaged/stolen property.
Which is Better Open Peril or Named Peril Policies?
When it comes down to it, open peril policies provide more coverage for your property. An open peril policy will provide more protection and give you a bit more piece of mind than a named peril insurance policy. However, open peril insurance policies are usually more expensive than a named peril policy. Whether or not an insurance policy is better also boils down to whether or not it fits into buyers budgets. So before you make your decision about which type of insurance policy you will purchase, talk to an agent and see which one would best suit you and your needs.