Named perils

A named perils policy only covers losses caused by risks specifically listed in your policy. While the exact list varies by insurer and policy type, common named perils often include:

• Fire or smoke damage like a kitchen fire that damages restaurant equipment or inventory.
• Theft, such as landscaping tools or inventory stolen during a break-in.
• Vandalism, for example, someone damages your retail storefront or office property.
• Windstorm or hail that damages signage or roofing (may vary by location).
• Explosion, such as a gas-related explosion that damages your building.
• Falling objects like a tree limb or debris damaging your property.

If a cause of loss isn’t specifically listed—such as flood or earthquake—it typically won’t be covered unless you add separate coverage.

Some of the most common causes of property damage aren't included in standard named perils policies and often require separate coverage, such as:

• Flood damage: Typically excluded nationwide and requires separate flood insurance.
• Earthquake damage: Often excluded, especially relevant in states like California.
• Hurricane or windstorm damage: May require special endorsements in coastal areas.

Small business owners should review their location-specific risks carefully to avoid coverage gaps that could lead to significant out-of-pocket costs after a disaster.

With a named perils policy, the burden of proof is on you, the policyholder, which means:

• You must show your loss was caused by a peril specifically named in your policy.
• If the cause of damage can’t be clearly tied to a listed peril, the claim may be denied.

By comparison, open perils or “all-risk” policies work differently—the insurer must prove that an excluded peril caused the loss.

This distinction is important because it can affect how easily claims are approved and how much documentation you may need to provide after a loss.

A named perils policy may make sense if:

• You operate in a lower-risk area
• Your property value is relatively low
• You’re primarily focused on keeping insurance costs down

An open perils policy may be a better fit if:

• You rely heavily on expensive equipment or inventory
• Your business operates in an area prone to weather or natural disasters
• You want broader protection and fewer surprises at claim time

While open perils coverage typically costs more, it often provides greater peace of mind for growing businesses.

Before choosing a named perils policy, it’s important to review:

• Coverage limits and sub-limits that may apply to certain perils
• Deductibles, which may be higher for specific types of losses
• Exclusions and gaps, especially for weather-related or environmental risks

Understanding these details upfront can help prevent unexpected expenses and ensure your coverage aligns with your actual risk exposure.