What defines a "named peril" policy?

A "named peril" policy is characterized by its approach to coverage, which focuses specifically on risks that are expressly listed in the policy. This means that the protection offered is limited to only those perils that are named, making it crucial for the policyholder to understand which risks are included to ensure adequate coverage for their needs.

For instance, if a named peril policy lists fire, theft, and vandalism as covered risks, it will not provide coverage for any damages resulting from perils that are not mentioned, such as floods or earthquakes. This is in contrast to other types of policies that provide broader coverage, such as "all-risk" policies, which cover all perils except those that are specifically excluded.

The focus on named perils can make it easier for policyholders to understand their coverage, but it also means they must consider additional policies or riders if they wish to have broader protection. This specificity is an essential aspect of named peril policies, guiding policyholders in assessing their risks and determining the adequacy of their coverage.