Insurance policies come in two major varieties, open perils and named perils. Now before you go to far keep in mind that most Renters insurance policies are listed on a named perils policy. The simple explanation of the difference is that a named perils policy protects against – you guessed it – perils which are named or listed in the policy, and only those perils. If the coverage is not listed it is excluded.
An open perils policy generally protects against anything which is not specifically excluded in the policy. Open perils policies are much more common today for the actual building but on a renters insurance policy for the contents you would see a named perils policy. On an open perils policy if the loss is not excluded it is covered.
A NJ renters insurance policy holder took his insurance claim to small claims court when his renters insurance company refused to pay a claim caused by a broken washing machine. The homeowner had left the house for the weekend after starting a load of wash and returned to find the machine stuck in boiling cycle and the entire apartment destroyed by the steam. His insurance provider claimed that the apartment wasn’t protected against steam damage and refused to pay. Their case was laughed out of court when the judge treated them all to a brief chemistry lesson on gases, liquids and the fact that a horse is a horse is a horse-or in this case, H2O is H2O, no matter what form it happens to be in.
While this might have been decided differently in another courtroom – and while insurance claims generally shouldn’t ever get to this level – it’s a great example of named vs. open perils. If this were an open perils policy, and steam were not specifically excluded, the claim would likely have been paid forthwith.
Ultimately, here’s the important takeaway: With a named perils policy, it’s up to you to prove that the loss is covered under one of the events named in the policy. With an open perils policy, it’s up to the insurance company to prove an exclusion applies. Work with Effective Coverage the insurance experts for renters and make sure you understand your policy and that it meets your needs.
Also make sure you work with an insurance company that has a reputation for paying the claims in a safe manner.