With most homeowner’s insurance policies, you are required to prove that your personal property claim happened due to one of the named perils listed on your policy. However, there are premium policies where the only way you won't get reimbursed for personal property damages is if the peril is specifically excluded from your policy.

What is a ‘Peril’?

Peril is an insurance term for specific dangers that could cause damage to your property. For instance, a burst pipe, fire, theft or vandalism are all ‘perils’. Named perils coverage means that you are covered only for perils specifically mentioned or named in your insurance policy. If you are covered for all perils except those mentioned as exclusions, you are getting an open perils policy.

Traditional Coverage

The most common policy, HO3, is ‘all risk’ or ‘open peril’ regarding the actual building on your property, meaning you'd be insured for any peril that could happen to the structure of your home. All risk is also called open peril, because unless a specific peril is excluded you are covered. However, your personal property, the contents of your home, i.e. your stereo, computer, clothing and furniture, are only covered by named perils in an HO3 policy.

So why an HO5?

In an HO5 policy, both personal property and the building are covered under an open perils policy. Thus, if you have a claim due to anything that causes damage to the personal property within your home, you won’t have to prove that it happened because of a named peril. For instance, if your roof develops a water leak and your property is damaged, you do not have to prove that it happened based on a reason covered by your policy, such as hail. If the peril is not specifically excluded, you are covered.

The Bottom Line

There are 16 named perils that are generally insured against in a typical HO3 (traditional) policy. This covers most incidents that can happen, and is good enough that most people end up with this policy in order to avoid the slightly higher insurance premiums. However, if you have good credit and the difference in premium is relatively small, HO5 policies give you a no fuss policy where the burden of proof for any personal property claim lies with the insurance company and not you.