Named perils

Perils are causes of loss: fire, wind, theft, a burst pipe. A named perils policy lists the perils it covers, and only those. If whatever damaged your property isn’t on the list, the policy generally doesn’t pay.

How it works

Commercial property policies use a “causes of loss” form that sets out which perils apply. In the standard forms, the basic form names a short list, including fire, lightning, explosion, windstorm or hail, smoke, vandalism, sprinkler leakage and damage from aircraft or vehicles. The broad form adds a few more, such as falling objects, the weight of snow or ice, and certain water damage from leaking systems.

The alternative is open perilsOpen perilsAn open perils policy covers direct physical loss from any cause unless the policy specifically excludes it, making it the broadest common form of property coverage.Read the definition, which covers any direct physical loss unless the policy excludes it. Two practical differences follow:

• Under named perils, you generally have to show that a listed peril caused the loss. Under open perils, the insurer generally has to show an exclusion applies.
• A named perils list can leave gaps you don’t notice until you file a claim. Theft, for example, isn’t on the standard basic or broad lists.

Named perils policies still carry exclusionsExclusionAn exclusion is a provision in an insurance policy that removes coverage for specific causes, types of loss, property or activities the policy would otherwise cover.Read the definition too, such as flood and earthquake in most standard forms. The form that applies to you is shown on your declarations page.

An example

Where you’ll see it

You’ll see named perils most often on property and equipment policies. When you compare quotes, check which causes of loss form each one uses, not just the limit.