The dirty secret behind low rates that
marketing companies don’t want you to know about.
Insurance companies love to offer coverage. In fact, there are so many endorsements that are never used that most companies end up rewriting them to lower the cost. Many of these big brand companies offer streamlined options knowing that the most common denominator for clients is price.
The dirty secret that you didn’t know about your State Farm or Allstate policy is that there are separate rules when it comes to your home and your contents. I can’t count how many times I wrote a partial denial because the policy covered the home but not the contents. This is by no means a dig at these companies. They know price sells. It is no surprise that State Farm and Allstate make up a large portion of the market. The flip side of the story is that many companies like Safeco, Travelers, or Mercury are just as big offering competitive prices, for more coverage.
Let’s break down the difference between Named Perils and Open Perils.
- Named Perils provides coverage only for those perils listed in the policy, such as fire, theft, falling objects, and vandalism.
Common Named Perils:
- Fire or Lighting
- Windstorm and hail- interior damages covered only if there is a storm-created opening.
- Riot and Civil Commotion
- Smoke- sudden and accidental
- Vandalism or Malicious Mischief
That means that unless your contents are damaged by these specific perils.
How Open Perils work-
- Open Perils provides insurance coverage for any reason not specifically excluded.
We do not insure for any direct or indirect losses or damage caused by, resulting from, contributing to, or aggravated by any of the following.
- Ordinance or Law
- Earth Movement
- Flood/sewer back up
- Power failure (off or on-premise)
- Nuclear hazard
- Illegal activities
- Intentional loss
- Government actions
It boils down to risk tolerance. With named peril policies, the homeowner retains more risk as there is less coverage. Yet in my experience, most homeowners do not expect their policies to pay for their home damages but not their contents.
For our clients at TWG, we just want to educate and allow our clients to determine how much risk they want to retain for the premium savings.