Understanding Your Insurance Policy

Day after day, I receive questions from clients regarding their insurance policy and what does it cover. In Florida, insurers write two types policies: named peril policy and an all risky policy (a/k/a comprehensive policy). Each policy is different and to determine which is better, varies on a claim by claim basis. You make be asking which policy is better?
In a nutshell, here is how they differ:

All Risk Peril Policy
An all risk policy covers every and any type of loss under the sun except what is specifically excluded in the policy. This type of policy is usually more expensive for the policyholder, but more than likely will cover a broader spectrum of damage to the property. In litigation, the burden is on the insurance company to prove the loss and ensuing damage is excluded. If the insurance company cannot prove an exclusion applies, then coverage should be afforded. The key in litigation claims under an all risk policy boils down to the exclusions and limitations written with the policy. Some common exclusions our firm has come across include but are not limited to:

  • Earthquake
  • Water damage exclusions
  • Mold
  • Wear and tear, rust, corrosion, fungus, decay, deterioration, hidden or latent defect, settling, cracking, shrinking
  • Mechanical Breakdown
  • Flood
  • Repeated seepage and sewer backup
  • Pollution
  • Damage to the interior of a dwelling/property by rain, snow or sleet unless the roof or walls are first damaged by a covered peril (i.e. wind created opening).

Named Peril Policy
A named peril policy is exactly what you would expect by its name. Specifically this type of policy covers only what is specifically described in the policy. Usually this type of policy is less expensive due to the limited amount of perils it covers. For example, if your policy does not specifically cover damage caused by mold, then it is otherwise excluded. A typical named peril policy usually covers fire, hail, wind, vandalism and smoke damage. At trial, the burden is on the insured to prove the one of the named perils in the policy caused the loss.

Verdict – If you are a policyholder that is in control of your policy the all risk policy is my recommendation. The advantage of an all risk policy is that it covers a broader spectrum of accidents and the broader the coverage the better chance on your claim being paid rather than denied by your insurance company. In addition, the burden is on the insurance company to prove at trial that the peril is excluded. My tip for policy holders is to always ask your insurance agent what type of policy you are purchasing and to ask what exclusions are included in your quote.



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