Wondering what 'Peril' means in the context of insurance? The term "Peril" is typically used to denote specific events or circumstances that tend to cause damage or loss to insured property.
When we refer to a Perils policy, it is basically an insurance policy that covers specific Perils or risks such as fire, floods, etc. This means the policy will only cover losses that are caused by the Perils that are specifically named in the insurance policy. Any other losses caused by other Perils will not be covered.
In case more coverage is needed for Perils that are not covered by the policy, policyholders may need to purchase additional coverage or a different type of policy that provides broader coverage.
What is an example of a Peril?
Generally, most insurance policies tend to include the “STFI” Peril, which comes in the category of 'Standard Fire & Special Perils policy'. This means that if you are insured as per the above-mentioned plan, you can also raise a claim in case of a flood situation that causes damage. Wondering why?
You should be aware that a flood is usually specified as a named Peril as per the “STFI” cover. This cover includes Perils such as storms, tempests, and cyclones, among others, as per the regulator.
Typically, in such a scenario. the claim settlement process requires the policyholder to promptly notify the insurer in case of damage due to flood.
However, if the loss is caused by a Peril that is not specifically named in the policy, such as a flood or earthquake, the policy will not provide coverage.
What is a Special Perils Policy in Insurance?
In insurance, a "Special Perils Policy" is a type of insurance policy that provides coverage for all risks or Perils that are not specifically excluded in the policy. This is also known as an "all-risk" policy or "open-perils" policy.
This generally provides broader coverage than one would find in a named Perils policy. With a Special Perils policy, the burden of proof is on the insurer to show that a particular loss or damage is not covered, rather than on the policyholder to prove that it is covered.
However, even with a Special Perils policy, there may be exclusions or limitations in the policy that may affect coverage. For example, certain types of losses, such as intentional acts, war, or nuclear accidents, may be excluded.
It is important for policyholders to understand and review the policy coverage, exclusions, and limitations before purchasing a Special Perils policy to ensure that they have adequate coverage for their specific needs.
Remember, Special Perils policies are typically used for Commercial Property Insurance, where there is a greater risk of loss due to various Perils. However, they can also be used for Personal Insurance policies, such as Homeowners Insurance and Renters Insurance.
What are the features of a Special Perils Policy?
A Special Perils policy provides broader coverage than a named Perils policy, some of which are listed as follows:
Open-ended coverage: This covers all risks or Perils that are not specifically excluded, thereby it provides open-ended coverage for a broader set of losses.
Comprehensive coverage: This spans a wide range of risks and hazards, including natural disasters, theft, vandalism, and other unforeseen events.
Flexibility: This aims to be flexible and can be customised to meet the specific needs of the policyholder.
Higher premium: Due to its broad coverage, this may be more expensive than a named Perils policy, and the premium may vary depending on the specific risks and hazards covered.
Exclusions and limitations: While a Special Perils policy provides broader coverage than a named Perils policy, there may still be exclusions or limitations in the policy that may affect coverage.
Overall, a Special Perils policy can provide greater peace of mind to policyholders by offering comprehensive coverage for a wide range of risks and hazards. However, it is important to carefully review policy coverage, exclusions, and limitations before purchasing to ensure that it provides adequate coverage. Policyholders need to carefully review the Perils covered by their insurance policy and ensure that it provides adequate coverage for their specific needs.
