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Named perils

Named perils coverage is a type of business property insurance that only protects you from hazards and risks explicitly described in your insurance policy.

What are named perils?

Named perils are specific risks and losses listed in your insurance policy. You may find named perils in several policies, but the most common one is property insurance. For example, the named perils in your commercial property insurance policy might be fire, theft, and wind damage. Not all policies cover the same named perils. Commonly listed perils include:

  • Fire
  • Lightning
  • Vandalism
  • Wind damage
  • Hail damage
  • Smoke
  • Theft

It’s important to remember that a named perils policy only pays out for losses caused by specifically identified risks, as opposed to an open perils policy, which covers everything except explicitly excluded events.

What happens if there’s an accident that’s not listed?

The risk of named perils coverage is that if you experience a loss that wasn’t listed in your policy, you won’t be covered for it. You will need to pay for any repairs or other expenses out of pocket.

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What is an open perils policy?

An open perils policy, also called all-risk coverage, lists certain exclusions but covers most other claims not specifically excluded by the policy. Most non-listed risks are covered.

For example, if a pipe bursts in your building and the flooding damages your business's computers, your insurance company will cover your claim, unless your policy specifically states that flooding isn’t included.

Named perils vs. open perils

A named perils policy is essentially the opposite of an open perils policy. A named perils policy will only cover risks that are included, while an open perils policy covers everything unless it’s excluded.

How do you decide if you need a named perils vs. open perils policy?

You’ll need to assess your business and property and determine which option best fits your needs based on your situation. Keep in mind that because technology is continually evolving, it may be challenging to determine all the risks that your IT business could potentially face.

A named perils policy costs less than an open perils policy, but it offers less protection. Open perils coverage is more comprehensive than named perils coverage and will protect you in the event of an unforeseen loss.

Remember, an open perils policy won’t necessarily guarantee your IT business’s protection from every kind of loss. Even an open perils policy will typically include some common exclusions. If your open perils policy doesn’t sufficiently cover all the hazards you’re concerned about, you should consider purchasing a named perils policy on top of it to fill that gap.

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