From time to time when reviewing you insurance requirements you will come across the expression ” Insured Peril” but what is an insured peril under an insurance policy and what types of insurance do they appear on.
What is an insured peril in an insurance policy?
An insured peril is a fortuitous or chance happening or contingency that may lead to loss or damage for which the policy will provide an indemnity. Examples of such perils are fire, theft, accidental damage and providing that the damage or loss is as a result of an insured peril then insurers will, subject to other claims considerations settle a claim under the policy.
This can lead to some confusion in general terms with members of the public who may have specific questions as to whether a type of claim is covered under a policy. A good example of this is the current situation regarding whether fracking damage is covered by home insurance policies. Many are concerned that as fracking is not mentioned specifically in the policy then the policy does not cover any damage originating from fracking. This is fundamentally incorrect. The insured peril here is subsidence and if the intention of the policy was to exclude fracking damage then it would have to be specifically excluded more. To place this discussion in some context it is the same as suggesting that a home insurance policy does not cover damage caused by a fire started by a thirteen year old boy as the policy does not mention 13 year old boys!
What is an excluded peril in an insurance policy?
By definition an excluded peril is the opposite of an insured peril. It is a specified contingency that the policy excludes any damage that may arise as a result of that peril. Excluded perils are commonly used in all risks insurance where the cover provided by the policy is not based upon a series of specified insured perils but more broadly on sudden and unforeseen loss or damage. This is a much wider cover than a specified perils basis but insurers will restrict the scope of that cover with excluded perils such as damage by pests or vermin and wear and tear.
What types of policies contain insured perils?
Insured perils are common across a wide range of property damage insurance policies in both the personal and business insurance sector. It is the traditional method for describing the cover under the policy. Insurance policies that provide an indemnity in respect of the policyholders legal liability such as public liability, employers liability, are not based upon insured perils.