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Named perils home insurance in Canada

Named perils – or basic – home insurance is one of several policy types available to homeowners in Canada. As its name suggests, it protects your home against specific perils only – all of which are listed or ‘named’ in the policy. For instance, if ‘theft’ is mentioned, then the peril is covered. If the peril isn’t mentioned, then it isn’t covered. This applies to both your dwelling and personal belongings.

Named perils is the cheapest home insurance policy available. The drawback to the reduced cost is that it puts the policyholder at a greater financial risk, as its number of possible protections is limited compared to other policy types (aside from the no-frills policy). For instance, both broad form and comprehensive policies are designed to protect your dwelling against all known perils – though there may be some exclusions (listed in the policy itself). Named perils is the opposite – it’s designed to protect your property against a handful of perils only, while exclusions are not listed at all (and there are usually more of them than in the other two policy types).

Furthermore, if you are a named perils policyholder, the onus is on you to prove that the peril you’re filing a claim for is not an exclusion. Conversely, in the case of broad form and comprehensive policies, it is the insurer who has to prove that the peril is an exclusion, making it easier for you to receive the necessary funds.

What does named perils home insurance cover?

Named perils policy will usually cover the following:

• Your dwelling: This includes the home itself and potentially other structures on your property, such as your guest house, barn, shed or detached garage. Note that a named perils property will protect your dwelling against named perils only.
• Your belongings: This includes all the contents of your home, such as your clothing, electronics, furniture and similar items. Despite covering all your belongings, the named perils policy will only do so against select few perils.
• Additional living expenses: If you suddenly become displaced by a covered peril, your named perils policy will pay for your additional living expenses, such as lodging, groceries and travel.

Liability coverage

Named perils policy provides the following protections when it comes to liability:

• Personal liability: Should someone accidentally get injured on your property, you can receive personal liability coverage ranging from $100,000 to $5,000,000 – to pay for potential legal action against you.
• Voluntary medical expenses: Should you injure someone on your property, the medical expenses for that injury will be covered for up to a year from the date of the injury. Coverage may range from $1,000 to $10,000.
• Accidental damage to property: Should you or a minor under your care accidentally damage someone else’s property or items on said property, you may get coverage ranging from $500 to $10,000.

Commonly covered perils by the named perils policy

Named perils policy will protect your property and belongings against the following perils:

• Fire: If your belongings or property end up on fire, you will receive coverage, regardless of what causes the fire (whether it’s arson, your stove or a burning forest). The only exception here is if the policyholder decides to intentionally burn down your property.
• Lightning: A lightning strike can damage both the wiring in your walls and the appliances and electronics inside your home. This coverage will pay for the necessary repairs and/or replacements.
• Theft and vandalism: If someone who isn’t covered by your policy robs or damages your home, you can file a claim to recuperate the losses.
• Windstorm and hail: If your property or belongings get damaged by wind or hail – or by flying debris and/or falling trees and branches flung by wind – then you will receive a payout to replace or repair what’s been damaged.
• Falling objects: If your home were to get crushed by a falling object, such as space debris or space craft, you can get coverage to pay for the necessary repairs and replacements.
• Water damage: Water damage is tricky, as it may cover leakage from things like indoor plumbing, air conditioning, sprinklers and similar appliances, but not from sewer back-up or overland flooding. This is especially true when it comes to named perils coverage.

How is a named perils policy different from other types?

While the named perils policy will protect your home from every major peril, including fire, theft and water, it will not protect it from everything. In fact, anything that doesn’t fit into its strict list of perils is likely to get rejected during the claims process.

There may be exceptions within exceptions too. Water damage, for instance, may protect you from some water-related hazards but not others. Comprehensive policy, on the other hand, is more likely to protect you against a wider range of water-related hazards (including overland flooding and sewer back-up).

In addition, the burden to prove that the peril in question is covered by your policy is on you, the policyholder, not the insurer, whereas in the case of broad form and comprehensive policy types, the burden of disproving the claim falls on the insurer. In other words, you are far more likely to receive coverage with other policy types than you are with a named perils policy.

As a result, most insurers would not recommend a named perils policy to your average homeowner.

With that in mind, here’s how the named perils policy compares to others policy types:

Is named perils home insurance coverage right for you?

If you’re an average homeowner in Canada, then it’s unlikely that a named perils home insurance policy would be right for you. The coverage offered under named perils is often too narrow to be worth the money in most cases.

That said, this policy type isn’t entirely without merit. For one, it is cheaper than broad form or comprehensive coverages. This means that if your home is unoccupied – and devoid of personal possessions (for renovation purposes or because it’s a vacation home, for instance) – then this cheaper policy may be worth it, since you’re less likely to incur heavy losses in the event of a major peril.