Which of the following is true about named perils policies?

Named perils policies specifically list the risks or perils that are covered under the policy. This means that coverage is only provided for the events explicitly stated within the policy document. Because of this specificity, there can be numerous perils that are not included, thus leaving certain risks unprotected. This characteristic distinguishes named perils policies from open perils policies, which cover any risk that is not specifically excluded.

While it is true that named perils policies generally have a lower premium compared to open perils policies, the focus of the correct answer is on the potential gaps in coverage that can arise due to the selective nature of named perils. The narrow scope of coverage means that if a peril is not named, the insured would not receive benefits for any loss related to that unlisted risk. Therefore, understanding that some risks may remain unprotected is essential when evaluating the coverage offered by named perils policies.