Named Peril Policy
Definition - What does Named Peril Policy mean?
A named peril policy refers to insurance for a property (residential home or business building) which coverage, in case of damage, by the insurance company is limited to hazards specifically listed in the policy. When damage to the property happens and is caused by something not in the list, the insurance company is not obliged to cover it.
Insuranceopedia explains Named Peril Policy
Insuring one's property means knowing not just the conditions of property but also the conditions of the location. If the property is located in an area that is known to experience constant flooding, then it is wise for the insured to purchase an insurance that will cover damages to property due to a flood. If the person can be certain about the hazards such as fire or earthquake that might come across his or her property in the future, then he or she might opt to buy a named peril policy.
However, hazards can never ever be ascertained. If a property is damaged by an incident of burglary but that particular peril is not named in the policy, then the insured will be responsible for spending everything for the damage.
Even if it is more expensive, some people buy the open peril policy, unlike the named peril policy, covers for damages which causes are not even specifically listed in the policy. It should be noted though that this policy is not totally comprehensive. It also features exclusions. Despite that handicap, loaning banks prefer this policy over the named peril because of its more extensive coverage.