Home Insurance: What Peril Means to your Policy

Why do homeowners need to purchase a home insurance policy? Getting home insurance is a great way to protect yourself from lawsuits and is usually required by your housing lender. Ideally, you only need enough to cover your property and belongings. Investing in good quality coverage means you will have to pay less money out of pocket if the unthinkable happens. Some insurers may have coverage requirements for replacement cost protection. As a good rule of thumb, your coverage should be equal to the full replacement cost of your home. Many home insurance policies provide customers with a package of coverage.
However, it is important to keep in mind that coverage is only viable if your policy covers the peril that caused the damage. A peril is a term used to represent the specific cause for a loss. A covered peril, like a tsunami, theft, or wildfire, must have been the cause of your loss in order for you to receive reimbursement. Home insurance does not cover flood damage. Flood insurance can be purchased through a private insurer or through the National Flood Insurance Program.

Below is a list of common coverage forms.

Dwelling Fire Form: Covers your dwelling only. This form does not cover your personal liability, medical payments, or personal property.

Basic Form: This form insures your property against perils such as fire, smoke, windstorm, hail, theft, civil unrest, lightning, explosions, and vandalism.

Modified Coverage Form: Modified coverage covers the same perils as the basic form when the cost to rebuild older homes is greater than the market value.

Broad Form: This protects your property from the perils listed in the basic form, with the addition of perils such as: trees and other falling objects; the weight of ice, snow, and sleet; the freezing, sudden overflow, or rupture of a heating, air conditioning, plumbing or fire sprinkler system; or household appliance.

Special Form: Insures your property against all perils, except those specifically listed as not covered. The perils that are commonly excluded are flood, war, nuclear accidents, and earthquakes.

Tenants Form: For renters. Mainly your personal property against perils listed in the broad Form.

Condominium Unit Owners Form: As the name implies, this form is for owner-occupants of condominium units. It insures your personal property, walls, floors and ceiling against perils listed in the broad form.

Other types of home insurance exist for different types of residences, such as a townhouse or a mobile home that does not rest on a permanent foundation.