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Named perils are specific causes of damage or loss that an insurance policy lists in its explanation of coverage.
These specific losses may include things like fire or theft, but the policy must name them. If the risk isn’t named, it may not be covered. Also, names vary by the insurance company; what one company may call a risk may differ from what another company calls it.
What does named perils insurance cover?
Named perils vary by insurance policy, which is why it’s very important to shop around for a policy that covers the exact risks you want covered. If you live in an area with seasonal tornadoes, you would want a policy that names weather events as a covered peril. The named perils list should include any and all risks that could damage your property and require you to seek help with repairing or replacing it.
You can usually find the exact list of named perils in a specific part of your insurance policy. Look for the ‘Perils Insured Against’ portion for full details.
Not all parts of the country have to cover the same perils, but they can include the following:
- Aircraft.
- Explosion.
- Falling objects.
- Fire or lightning.
- Hail or windstorm.
- Riot.
- Smoke.
- Vehicles.
If your open perils policy excluded riots, but you live in an area where riots are possible, you could pay for an additional policy just to cover rioting-related damages. This additional policy would be a named perils policy.
What does named perils insurance not cover?
Named perils insurance doesn’t cover anything not specifically mentioned. That’s why this type of insurance is often used to supplement the coverage of a more comprehensive plan. It’s limited and could be an affordable way to protect against very unique risks, such as a volcano.
Named perils coverage vs. all perils coverage
Insurance policies with named perils offer coverage by explicitly stating what damages they cover. For example, a policy that lists fire would likely cover your house burning down.
Named perils are different from policies with “open perils.” In an open peril policy, all possible risks are covered unless specifically excluded.
This brief way of saying this is:
- Named perils: only mentioned risks are covered.
- Open perils: only mentioned exclusions are not covered.
Flooding is a good example of a risk that’s often excluded from open peril policies. The policy will state that it doesn’t cover it. If you were to buy a specific rider to add this coverage to your policy, however, that rider would list flooding as a named peril and then would cover it.
Should I buy named peril coverage?
Named peril coverage may be a more affordable way to get very limited coverage against a specific risk when you don't want to be covered against all the risks in an open perils plan. This will leave you vulnerable to everything against that named peril, but for some consumers, this is a risk they are willing to take. Your own financial situation and aversion to risk will determine if this is a good strategy.
No one can tell you if a named peril policy is a good investment. Consulting with an insurance professional can give you more information about the types of policies available in your area and what they will cost. If, after looking at an open perils policy, you feel it excludes something important, you might want to see if it can be included in a named perils policy.
This story was written by NJ Personal Finance, a partner of NJ.com. The information presented here is created independently from the NJ.com editorial staff, and purchases made through links in this article may result in NJ.com earning a commission.
