Named Perils vs. Open Perils
Plain English
Named perils means "only what's on the list." Open perils, or all-risk, means "everything except what's on the exclusion list." Open perils coverage is broader, but it still doesn't cover everything: floods, earthquakes, wear and tear and some water damage are commonly excluded. Some homeowners policies cover the house on one basis and belongings on another.
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On this page
Definition
A peril is a cause of loss, such as fire, theft or wind. A named perils policy covers only the causes of loss it lists. An open perils policy, also called all-risk, covers any cause of loss the policy doesn't specifically exclude. The difference decides who has to point to the policy wording: under named perils, the loss has to match a listed peril; under open perils, it's covered unless an exclusion applies.
Why It Matters
The same loss can be covered under one approach and not the other. A named perils policy that doesn't list a cause won't pay for it, however sudden it was. An open perils policy would pay unless an exclusion applies. Knowing which approach applies to your house and to your belongings tells you which part of the policy to read first.
Real-World Example
Imagine a guest knocks a full paint can onto a new rug and ruins it. Under a named perils section listing fire, lightning, windstorm, theft and vandalism, the homeowner would look for that cause on the list, and an accidental spill isn't on it. Under an open perils section, the question flips: is there an exclusion that applies? If none does, the loss would generally be covered. The policy's exact list and exclusions decide.
Common Misconceptions
- Thinking "all-risk" means any risk at all. The Texas Department of Insurance notes all-risk policies "provide the most coverage, but they don't cover everything."
- Assuming the whole policy uses one approach. The dwelling and personal property sections can differ.
- Reading only the list of covered perils on an open perils policy. On those, the exclusions section is what matters most.
Key Takeaways
- Texas Department of Insurance: "All-risk policies cover any event that the policy doesn't specifically exclude… Named perils policies cover only the events listed in the policy."
- The NAIC glossary defines a named peril policy as "insurance for losses explicitly defined in the policy contract," and all-risk as covering "risks not explicitly excluded in the policy contract."
- All-risk policies usually don't cover termites, wear and tear, sewer backups, floods or earthquakes, according to the Texas Department of Insurance. Some of those can be added by endorsement.
- The Texas Department of Insurance notes that a lender will probably require an all-risk policy if you owe money on your house.
Frequently Asked Questions
How do I know which one my policy uses?
Read the section that describes covered causes of loss, often titled "Perils Insured Against." A list of specific perils means named perils. Wording that covers direct physical loss except what's excluded means open perils. Your agent can confirm it for each section.
Is open perils the better choice?
It's broader, and usually costs more. Named perils policies are cheaper, the Texas Department of Insurance notes, but might not provide all the coverage you need.
What's it commonly confused with?
Replacement cost vs actual cash value. Named and open perils decide which causes of loss a policy pays for; replacement cost and actual cash value decide how much a covered loss pays.
Related Terms
Related Coverages
- Homeowners Insurance
Related Scenarios
Explore the rest of the Core Insurance category.
Browse Core Insurance terms →Sources
The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- tdi.texas.govHome insurance policies: All risk or named peril · Texas Department of Insurance
- content.naic.orgGlossary of Insurance Terms · National Association of Insurance Commissioners (NAIC)
Educational information, not advice: This page is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers.