Legal Definitions - named-perils policy

A named-perils policy is a type of insurance contract that provides coverage only for losses caused by specific events or risks that are explicitly listed, or "named," in the policy document. If a loss occurs due to an event that is not specifically mentioned in the policy, the insurance company will not provide coverage. This means the policyholder must demonstrate that their loss was a direct result of one of the perils explicitly named in their policy.

• Example 1: Basic Homeowner's Insurance

  Imagine a homeowner purchases a very basic insurance policy for their house. This policy explicitly states it covers damage resulting from "fire, lightning, and windstorms." One winter, a pipe bursts inside the walls, causing extensive water damage to the flooring and drywall. When the homeowner files a claim, the insurance company denies it because "burst pipes" or "water damage" were not among the specific perils listed in their policy.

  This example illustrates a named-perils policy because coverage is limited strictly to fire, lightning, and windstorms. Since water damage from a burst pipe was not an explicitly named peril, the loss is not covered.

• Example 2: Commercial Property Insurance for a Retail Store

  A small boutique owner buys a commercial property insurance policy for their shop. The policy specifically names "fire, theft, and vandalism" as covered perils. One evening, a sudden and severe hailstorm causes significant damage to the store's roof and skylights. The owner files a claim for the repair costs.

  This demonstrates a named-perils policy because if "hail damage" or "storm damage" was not explicitly listed alongside fire, theft, and vandalism, the insurance company would likely deny the claim. Coverage only extends to the perils specifically named in the policy.

• Example 3: Auto Insurance for Specific Risks

  A car owner purchases an auto insurance policy that specifically covers damage from "collision with another vehicle" and "theft." While parked, a large tree branch falls onto the car during a sudden, unexpected gust of wind, crushing the roof and breaking the windshield. The owner contacts their insurer to cover the repair costs.

  This is an example of a named-perils policy because if "falling objects" or "wind damage" were not explicitly included in the list of covered perils (which only mentioned collision and theft), the damage from the tree branch would not be covered. The policy only responds to the risks specifically named within its terms.