Property & Casualty Insurance Exam (National Portion)Property and Casualty Insurance BasicsEasy
A homeowner's policy covers specific perils listed in the policy, such as fire, lightning, and windstorm. If damage occurs from a peril not explicitly named, there is no coverage. This type of policy is known as a(n):
- ANamed Peril Policy
- BBroad Form Policy
- COpen Peril Policy
- DAll-Risk Policy
Show answer & explanationAnswer & explanation
Correct answer: A. Named Peril Policy
A named peril policy (also known as a specified peril policy) provides coverage only for the perils explicitly listed in the policy. If a peril is not named, it is not covered.
Why the other options are wrong
- B. A broad form policy is typically a type of named peril policy that covers more perils than a basic form but is not 'all-risk'.
- C. An open peril policy (or 'all-risk') covers all perils except those specifically excluded.
- D. An all-risk policy is another term for an open peril policy.
Named Peril Policy
An insurance policy that provides coverage only for the specific causes of loss (perils) that are explicitly listed or named in the policy.
- If a peril is not named, it is not covered
- Often less expensive than open peril policies
- Burden of proof is on the insured to show loss from a named peril
Memory trick: NAMED PERIL lists what's IN; OPEN PERIL lists what's OUT.