What is the difference between "named peril" and "open peril" policies?

The distinction between named peril and open peril policies lies primarily in the scope of coverage they provide. A named peril policy specifically lists the perils that are covered. This means that only the perils explicitly mentioned in the policy are covered, such as fire, theft, or vandalism. If a peril is not listed, then coverage for that loss is not provided.

On the other hand, an open peril policy, also known as all-risk or comprehensive coverage, protects against all risks of loss or damage except those that are expressly excluded in the policy. This approach offers broader coverage, covering virtually all possible losses unless the policy explicitly states otherwise.

This fundamental difference is crucial for policyholders to understand when evaluating their insurance needs. Named peril policies can sometimes be more affordable because they limit coverage, while open peril policies typically provide more extensive protection but may come at a higher cost. The details around the coverage limits are not the focus of this difference, making it clear how the breadth of coverage differs between the two types of policies.