This refers to covered hazards or events that are explicitly listed in your insurance policy.
Though other policies may have named perils, the term often describes a type of Property Insurance policy. For example, your Property Insurance might only cover the following named perils:
- Wind damage.
Though standard Property Insurance policies typically don’t cover flood, hurricane, or earthquake damage, you can always add riders to your policy to address those loss scenarios.
If an event isn’t listed in your named-perils policy, you won’t receive coverage for the property damage it causes. By contrast, an “open-perils” policy covers any event other than those explicitly excluded in the contract. So say you have an open-perils Property Insurance policy that excludes employee dishonesty. If your worker steals your construction business’s expensive power tools, you will have to cover the loss on your own. If you have a named-perils policy that specifically lists employee dishonesty as a covered event, you’re in the clear.
These differences are a good illustration of why it’s important to read and understand the terms of your small business’s insurance policies. You don’t want to mistakenly think you have coverage for an event, only to find out that you don’t when it comes time to file a claim.
Typically, you’ll pay less for named-perils coverage than you would for an open-perils policy. To make sure your business is adequately insured and that you understand what your policy covers, be sure to work with an insurance agent who understands your industry.
RETURN TO GLOSSARY