Blog

The word peril is part of the insurance world.

But what does it really mean to a homeowner? The definition of peril is any unexpected or accidental event, situation, or incident that causes property damage or loss.

There are multiple levels of coverage which will affect which perils a home insurance policy will cover.

The Insurance Bureau of Canada (IBC) summarizes them as:

1. Comprehensive. This covers the building and contents for all risksarising from accidents or unforeseeable incidents, except for those that are specifically excluded. It is the most popular type of policy, but its premiums are higher.
2. Basic or Named Perils. This policy covers those perils that are specifically stated. This offers basic and affordable coverage, but homeowners that choose this should have a higher risk tolerance. Premiums are lower, but the insurance offers the narrowest coverage.
3. Broad. Provides comprehensive coverage on big-ticket items, such as the building and attached structures, as well as named perils coverage on contents.
4. No Frills. Offered by some insurers, this policy covers properties that don’t meet normal insurance standards. It is often soldwithout any coverage for contents. A home that is left vacant or has unusually high repair issues like old plumbing and electrical needs would be a good candidate for this policy.

Understanding Perils

A peril is a chance event that is unexpected and accidental as far as the policyholder is concerned. For example, IBC notes, if a garage door is spray painted with graffiti and must be removed and cleaned, the damage is due to the peril of vandalism.

However, the gradual deterioration of shingle roofing or the rotting of wooden fencing is nature and expected and, therefore, not an insured peril. It would be considered normal wear and tear. Remember too, as a homeowner you are required by the insurer to maintain your property.

Home insurance policies, as mentioned above, offer coverage for either named perils – such as fire, wind, theft, etc., except those excluded or a combination of both.

Insured perils

This applies to coverage for both the building and its contents. It would include:

• Aircraft or vehicle impact
• Electrical current
• Explosion
• Falling object (excluding objects propelled by snow slide or earth movement)
• Fire
• Lightning
• Riot
• Smoke (released suddenly from malfunctioning cooking or heating devices, but not from fireplaces
• Theft
• Transportation (of personal property while it is temporarily away from your home, including fixtures and fittings being repaired or in seasonal storage)
• Vandalism (where the building is normally occupied)
• Water damage usually includes damage arising from sudden and accidental escape of water from an indoor plumbing, heating, sprinkler or air conditioning system; or from an indoor or outdoor domestic appliance on your premises; or from a water main. Coverage from overland flooding or sewer backup may be available as optional add-ons to your policy. Speak to your insurance broker regarding the specifics.
• Wind and hail (applies to the exterior of the building excluding antennas and satellite dishes; interior of building is covered if the storm has first created an opening)
• Window breakage (in a building that is normally occupied)

READ MORE:

How to prevent hail damage

Uninsured perils

A home insurance policy is not a maintenance contract. Predictable events such as flooding of a home built on a flood plain, or preventable events, such as frozen indoor pipes, are not covered.

Excluded perils generally include:

• Landslides, earthquakes and other earth movements. While this is not covered on a home policy, damage from a fire or explosion caused by earth movement would be covered. Coverage for damage caused by an earthquake may be purchased as additional coverage.
• Damage arising from the freezing of indoor plumbing. This is generally regarded as preventable. If you’re away from your home for more than four days during the normal heating season, you must drain the plumbing or have your home checked regularly or daily to ensure that heat is maintained. If freezing-related damage were to occur and such precautions were not taken, it would likely be excluded.
• Damage from freezing outside the home. This is not covered, nor is melting or moving snow and ice, and heaving frost. Additional coverage for damage caused by roof ice damming may be available.
• Direct damage resulting from intentional application of heat (e.g. clothing shrunk by a clothes dryer or burned by an iron). This is not covered. However, if the dryer were to set the clothing on fire and flames spread to the room and its contents, the resulting damage would be covered.
• Damage by insects and rodents. This is excluded; some policies may make an exception for damage to building glass.
• Pollution
• Damage to property acquired illegally
• Losses caused by criminal or intentional acts by the policyholder
• Losses due to war, terrorism, nuclear attacks

Know your policy

An insurance policy is a legal document and it’s your responsibility to understand what is – and what is not – included in it. If you are unsure, you should speak with your insurance broker to know before something happens. Do you know what your policy covers? Bottom line, read the fine print and get help if it’s not clear to you.

RELATED READING:

Many Canadians unaware flood coverage extra: Survey