Named Perils
What Is a Named Peril?
A named peril is a designated event or circumstance your insurance policy is designed to cover, such as injury to another person, fire, or theft.
Basically, it’s a fancy way of referring to the specific incidents your insurance will help pay for, as written on your policy. If it’s on the list (fire, theft, vandalism), you’re covered. If it’s not on the list, you’re not covered.
How Does Named Peril Coverage Work for Small Businesses?
If you have a named peril policy, it only covers your business property if the loss is caused by one of the specified incidents.
For example, if fire and theft are named perils and your equipment is damaged in a fire, your policy could cover the cost to repair or replace it. But, if it’s destroyed by a type of damage that isn’t listed (e.g., a specific type of water damage), it won’t cover the cost.
This type of coverage can be more budget-friendly, but it requires you to read the list carefully so you understand what is and isn’t covered.
Named Peril vs. Open Perils (Special Form): What’s the Difference?
Named peril and open perils (aka special form) are two types of property coverage forms that function in opposite ways:
- Named peril coverage: Covers only the specific causes of loss listed in the policy (e.g., fire, theft, vandalism).
- Open perils coverage: Starts by covering any direct physical damage or loss to covered property, except what’s specifically excluded in the policy.
Key Takeaway: Named peril policies only cover what’s listed in the policy, while open perils policies cover everything except what’s excluded in the policy.
Named peril policies can leave more coverage gaps if an incident happens that isn’t listed. Open perils is typically broader, but it tends to cost more and still has exclusions you need to understand.
Named vs Open Peril Coverage: Quick Comparison
Swipe →
| Named Perils Coverage | Open Perils (Special Form) Coverage | |
|---|---|---|
|
What’s Covered? |
Only the specific causes of loss listed by name in the policy |
All causes of loss except those specifically excluded |
|
How It’s Worded |
“We cover loss caused by: fire, theft, vandalism…” |
“We cover direct physical loss unless excluded…” |
|
Risk of Gaps |
Higher — anything not named is usually not covered |
Lower — more risks are covered by default |
|
Typical Cost |
Often lower |
Often higher |
|
Best For |
Budget-conscious businesses with known key risks |
Businesses wanting broader, more flexible protection |
What Are Some Examples of Named Perils in Business Insurance?
Policies can vary, but common named perils for small business property coverage often include things like:
- Fire or lightning
- Theft or burglary
- Vandalism
- Windstorm or hail
- Smoke damage
- Explosion
- Sprinkler leakage
Your policy may list more (or fewer), so it’s essential to check the actual wording. Becoming familiar with what your policy covers is key to avoiding unpleasant surprises, and knowing what coverage gaps you may want to fill with other policies or endorsements.
How Do I Know Which Perils are Named on My Policy?
Follow these steps to find your policy’s named perils:
- Go to the property coverage section of your policy
- Find the section titled “Causes of Loss — Basic Form” or “Causes of Loss — Broad Form”
- The events listed in this section (often fire, theft, vandalism, etc.) are your named perils
If you’re unsure, ask your agent or insurance company to point out where the named perils are listed and explain any terms you don’t recognize.
Additional Resources
- What you’ll find on a Certificate of Insurance (COI)
- What is an ACORD COI?
Related Terms
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