What defines named perils coverage?

Named perils coverage is defined as a type of insurance policy that provides protection against specific risks that are explicitly listed within the policy. This means that if a peril is not mentioned in the policy, it is not covered. This approach allows policyholders to have a clear understanding of what risks they are protected against, fostering transparency and awareness.

For example, a named perils policy might cover damages from fire, theft, and vandalism, but if an event such as a flood or earthquake is not included in the listing, the insured would not receive compensation for losses from those events. This contrasts with open perils or all-risk coverage, where all risks are covered except those specifically excluded in the policy.

Understanding the limitations of named perils coverage is crucial for policyholders when assessing their insurance needs and ensuring they have adequate protection for potential risks.