Named Peril vs Open Peril

Insurance is a risk management technique. This risk management technique is accomplished by exchanging a relatively small amount of money upfront (the premium) in place of a large, and possibly catastrophic, unknown future event (a possible loss).

Purchasing insurance transfers the risk to a third party. When insurance is purchased, the risk of damage to the property is transferred to the insurer instead of the property owner.

With insurance, if your home burns down, the insurer will pay the insured for the loss instead of the insured having to cover the entire loss out of pocket.

Named Peril vs Open Peril

Perils are considered causes of loss. There are named perils and open perils.

Named perils are perils that are specifically listed as covered causes of loss perils, such as fire, lightning, windstorm or theft.

When a policy offers coverage for named perils, only damage from those specific perils is covered.

Open perils means that all perils, except for excluded, are covered. Every peril is considered covered, except for the perils that are listed as exclusions on the policy. All policies have exclusions.

It is common for different parts of different policies to handle perils in different ways. A policy may include provisions that state that an open perils provision applies to the building itself, while a named perils provision applies to the contents.

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