What types of losses do named peril policies cover?

Named peril policies are designed to offer coverage exclusively for the specific risks—known as perils—listed within the policy. This means that if a peril is not explicitly mentioned, it is not covered. For example, if a named peril policy includes coverage for fire, theft, and vandalism, then only losses stemming from these three specific events would be compensated.

This specific nature of coverage is critical because it clearly delineates the insured risks, allowing the insured to understand what protections are in place and what risks they are assuming. Unlike open peril policies, which provide broader coverage for all risks except those specifically excluded, named peril policies require insured parties to have a precise understanding of their coverage limitations.

Thus, the essence of a named peril policy is that coverage is not expansive; it is limited strictly to those risks mentioned in the policy document. This distinction is crucial for both agents and clients when determining insurance needs and understanding the protections offered.