What is a "named peril" policy?

A "named peril" policy is one that covers losses only from specific perils that are explicitly listed within the policy. This means that if a peril is not named in the policy, it will not be covered. By specifying the perils, the insurer outlines a clear and defined scope of coverage, which typically makes the policy less expensive than broader coverage types. For instance, if the policy lists perils such as fire, theft, and vandalism, then those are the only causes of loss for which the policyholder can file a claim.

This contrasts with other types of policies, such as "open peril" or "all-risk" policies, which cover all perils except for those specifically excluded in the policy's terms. Understanding the distinction between named peril and open peril is important for both agents and policyholders when assessing coverage needs and limitations. Policies that are limited to risks experienced by the policyholder or valid only in certain locations do not accurately define what a named peril policy is.