Your Neighborhood Law Firm

How does named peril and all-risk insurance differ?

Homeowners and homeowners’ associations in Texas are certainly aware of the need for comprehensive insurance coverage to protect their property. Given the number of natural disasters and catastrophes that have been happening, people are paying greater attention to their insurance needs.

Still, insurers are increasingly reluctant to provide the coverage to account for all eventualities. In some instances, they are denying claims with limited explanation and failed appeals.

It is imperative that HOAs and property owners know they have the necessary coverage. In some instances, there is confusion as to whether the coverage is all-risk or named peril. This is a key distinction and being cognizant can ensure payouts are made for claims.

What is the difference between all-risk and named peril insurance?

As its name implies, all-risk will cover any event that causes damage or loss and is not specifically excluded from the policy. It can include flooding, an earthquake and mold. If, for example, there is an all-risk policy but it says certain events are not covered, then the policy holder will not be able to collect.

Named peril will list events for which it provides coverage. In general, it can include the building and the contents of the building. If damage happens because of a fire, a hurricane, wind, hail, smoke and other issues, then the policy holder can try to collect if the perils are listed.

The policy can be basic or it can be basic with extended perils. Basic named peril covers the above listed problems and could include other causes of loss as they are added such as falling objects, freezing weather, snow and frozen pipes.

People who have an all-risk policy, have an incident and try to make a claim could be surprised to find that their policy did not cover what they are claiming. A sewer backup is an example. This can cause a flood and ruin property in the home. If it is not directly mentioned in the policy, the claim will likely be denied.

Know what an insurance policy covers and have help with disputes

Those who have had property damage could receive a secondary shock if they try to collect on insurance and are informed their policy does not cover for the cause of the damage. There could also be a disagreement as to how much is to be paid.

In these situations, it is imperative for HOAs and individual property owners to know the scope of their coverage. If there is a disagreement, having advice with the options to hold insurers accountable based on insurance law is crucial.