Open peril policy vs. named peril policy: What’s the difference?
When it comes to insuring your business, it’s important to understand the difference between open peril and named peril policies. Here’s a quick breakdown:
- A named peril policy covers only the risks specifically listed in the policy.
- An open peril policy — sometimes called an allrisk policy — covers all risks except those explicitly excluded from the policy. If a peril isn’t listed as an exclusion, it’s covered.
This matters because it affects the cost of your policy. Open peril policies tend to be more comprehensive but also more expensive, while named peril policies cover fewer risks at a lower cost.
By understanding these policies, you can tailor your coverage to your specific needs and only pay for what you need. So if your business is not at risk for certain perils listed in an open peril policy, a named peril policy might be a more cost-effective choice.
What are the main advantages of an open peril policy for small businesses?
An open peril policy provides broad coverage for small businesses, ensuring protection against all risks unless they’re expressly excluded. This means businesses don’t have to predict every possible issue they might face, offering peace of mind and comprehensive protection.
Another advantage is that the insurer bears the burden of proof in open peril policies. This means that if the insurer feels your claim is beyond the policy’s scope of coverage, they must prove it. If they can’t, they must pay.
What exclusions are usually present in an open peril policy?
Some typical exclusions to an open peril policy are:
- Dust damage
- Wind damage
- Mold or fungus growth
- Wear and tear or gradual deterioration
- Hazards with a higher likelihood of occurrence
Even if a particular type of insurance has been excluded from your open peril policy, it doesn’t mean you can’t get covered for these incidents. Talk to your insurance provider and add a rider to your policy to fill the coverage gaps.
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