Although homeowner’s insurance policies vary widely from company to company, they generally fall into two categories: All Risks and Named Perils. All Risks policies are more commonly used for houses occupied by the owner and insured (i.e. homestead property). Named Perils policies are generally seen when the homeowner does not reside at the property, such as a rental property. But what is the difference between them?
Named Perils: under these more restrictive policies, the cause of the damage must be specifically named in the policy for coverage to apply. If it is not listed as a ‘named peril’, then there is no coverage. For instance, your house may suffer water damage caused by a backed up sewer line. If you have a named perils policy which does not state that it provides coverage for damage caused by backed up sewer lines, then there is no coverage. The classic coverages provided by Named Perils policies include fire, windstorm, hail, aircraft, riot, vandalism, explosion and smoke. In Florida, it is also common to see policies covering just flood damage. Because these policies provide more limited coverage, they are usually cheaper than all risks policies.
All Risks: just as the name implies, these policies usually provide coverage for damage caused by all risks, unless specifically excluded under the policy. Because the scope of coverage is significantly greater than that provided under a Named Perils policy, these policies are likely to be more expensive as well.
In the litigation context, when dealing with an All Risks policy, the initial burden is on the homeowner to show that a covered loss (i.e. a burst water pipe) occurred at some time while the policy was in effect. After that, the burden shifts to the insurance carrier to prove that an exclusion applies (i.e. the damage was caused by constant or repeated seepage). On the other hand, when litigating a claim under a Named Perils policy, it is the insured’s burden to prove that the cause of the damage is named in the policy.
Which one is my policy?
Without looking at your individual policy, we cannot say for certain which type of coverage you have. However, there are several strong indicators. For instance, if you have a mortgage on your property, chances are good that you have an All Risks policy, as many mortgagors require expansive coverage to protect their investments. A common form of All Risks is also called an H0-3 policy. It will say “H0-3” right on the policy documents, which likely means you have an All Risks policy. These policies normally also contain language akin to the following: “We insure for direct physical loss to the property …by a peril listed below, unless the loss is excluded..
For more information, check out the Florida CFO Homeowners Insurance Overview