Property and Casualty Insurance Practice Exam

For which of the following does an "open peril" policy provide coverage?

1. Only specific risks listed in the policy

2. All risks of loss except those specifically excluded

3. Risks related to natural disasters only

4. None, as it is limited in scope

The correct answer is: All risks of loss except those specifically excluded

An "open peril" policy, also known as an "all-risk" or "all-perils" policy, provides coverage for all risks of loss except those that are specifically excluded in the policy wording. This means the policy offers broader protection than a named peril policy, which only covers risks that are explicitly listed. In an open peril policy, coverage is granted for a wide range of incidents unless the policy explicitly states certain exclusions. For example, if a policy indicates that it covers all perils except for exclusions like earthquake or flood, then it will cover everything else, including theft, fire, and vandalism. This characteristic makes open peril policies particularly appealing for individuals and businesses seeking comprehensive protection against various potential risks. In contrast, the other options limit the scope of coverage in ways that do not align with the nature of an open peril approach.