What is the primary characteristic of "Named Peril" coverage?

The primary characteristic of "Named Peril" coverage is that it specifically covers only those risks that are explicitly listed in the insurance policy. This type of coverage contrasts with "Open Peril" or "All Risk" policies, which provide coverage for all perils unless they are specifically excluded.

"Named Peril" coverage requires policyholders to be aware of the specific incidents or losses that are insured, which are typically detailed in the policy documentation. For example, if a homeowner's policy lists fire, theft, and vandalism as covered perils, then only damages resulting from those events would be compensated. If a loss occurs due to a peril not mentioned in the policy, such as flooding or earthquakes (if not listed), then that loss would not be covered.

This specificity allows for clearer expectations and potentially lower premiums, as the insurer is taking on less risk by not covering every possible event. Thus, understanding that it is only those risks outlined in the policy that will be covered is essential for policyholders.