Property and Casualty Insurance Practice Exam

What does a named/specific perils policy primarily do?

1. Covers all perils unless specifically excluded

2. Lists and covers only specific perils or causes of loss

3. Covers accidental losses not explicitly stated

4. Provides coverage based on the insured's total asset value

The correct answer is: Lists and covers only specific perils or causes of loss

A named or specific perils policy is designed to provide coverage exclusively for certain perils that are specifically listed in the policy. This means that if a peril is not explicitly mentioned in the policy, it is not covered. This type of policy offers a precise description of which risks are insured, allowing policyholders to understand exactly what is protected under their coverage. This can typically include perils such as fire, theft, or vandalism, among others, depending on the specifics of the policy. In contrast, other policy types, such as open perils or all-risk policies, cover all perils except those that are specifically excluded. Therefore, the named perils approach offers less broad protection, focusing only on the causes of loss that are listed, creating more predictable insurance costs and terms for both the insurer and the insured.