Which of the following best describes a situation covered under a named peril policy?

Which of the following best describes a situation covered under a named peril policy?

• A. All perils not listed are covered
• B. Only specific perils that are detailed in the policy are covered
• C. Coverage is broad and includes all risks
• D. It includes both named and unnamed perils

Answer: (B)

A named peril policy specifically covers only those hazards or perils that are explicitly listed in the policy document. This means that if an event, risk, or peril is not mentioned in the policy as a covered item, it will not be protected under this type of insurance. For example, if a named peril policy includes coverage for fire, theft, and vandalism but does not list earthquakes, then damage from an earthquake would not be covered. The focus on specific perils allows policyholders to understand precisely what risks are insured, providing clarity regarding what is and isn’t included. This is in contrast to an "open peril" or "all-risk" policy, which covers all risks except for those specifically excluded. Hence, the essence of a named peril policy is in its limitation to only the perils listed, making option B the most accurate description of its coverage.

A named peril policy specifically covers only those hazards or perils that are explicitly listed in the policy document. This means that if an event, risk, or peril is not mentioned in the policy as a covered item, it will not be protected under this type of insurance. For example, if a named peril policy includes coverage for fire, theft, and vandalism but does not list earthquakes, then damage from an earthquake would not be covered.

The focus on specific perils allows policyholders to understand precisely what risks are insured, providing clarity regarding what is and isn’t included. This is in contrast to an "open peril" or "all-risk" policy, which covers all risks except for those specifically excluded. Hence, the essence of a named peril policy is in its limitation to only the perils listed, making option B the most accurate description of its coverage.