Named perils explained
‘Perils’ is an insurance term for hazards that can cause property damage to your personal or commercial property.
Commercial property insurance exists to protect you and your small business from risks—sudden, unexpected events—to your building and your property. Although, in the insurance world, a policy doesn’t refer to chance events as risks. Instead, they’re called perils.
But an insurance company can’t cover all perils—not if it wants to stay in business. So, to limit the scope of coverage, many commercial property insurance policies provide ‘named perils coverage’. This type of insurance only covers losses to the property from perils that were explicitly named in the policy.
Curious what some commonly named perils are and whether named perils coverage is right for your small business? Read on to find out.
‘Perils’ is simply an insurance term for hazards that could cause substantial property damage or loss to your personal or commercial property.
In a policy, the named perils definition refers to the hazards that the policy specifically says are covered. Examples of perils are:
Because a named peril policy only covers explicitly stated perils, it tends to be less costly than an open peril (all-risk) insurance policy. And, when coverage is provided on a named peril basis, the burden of proof rests with the insured party. So, they must demonstrate that the named perils were in fact responsible for the loss.
For losses to be covered under a named peril policy, the insured has to prove that three criteria were met:
The final point is especially important to providers, since coverage depends on whether or not the peril was preventable.
For instance, if you have a fire break out in the office that was caused by old equipment with faulty electrical wiring, the insurance company may not cover the damage to your property.
Because the fire likely could have been avoided by taking proper care and maintenance of your office equipment. However, if a brand-new electronic device caught fire, it would be covered because there was nothing you could have done to avert the risk.
Not every commercial property policy will cover the same named perils. Each business needs to perform a risk-assessment and see whether there are perils that aren’t included but need to be. For example, a business in California may want to arrange for earthquake coverage, whereas a Florida business would be fine without it.
What are the most common named perils? They include:
Point blank, if your policy doesn’t list a specific hazard, and that hazard damages your property, you won’t be protected from the losses. As a result, you’ll be stuck paying for the damages and repairs.
Business owners generally have two types of commercial property coverage to choose from: ‘named perils’ and ‘all-risk.’
All-risk is a more expensive and comprehensive form of commercial property insurance. It covers all perils except for the ones that are explicitly excluded. Some policies call them ‘named exclusions.’ And, unlike a named perils policy, the insurance company has to prove that the peril responsible for the damage was originally excluded. Common exclusions include:
If you make the decision to purchase an all-risk policy, it’s vital that you double-check the policy to review the exclusions. And, if necessary, it may be wise to get additional coverage in order to shield yourself from higher-risk perils that are common to your area.
Purchasing commercial property insurance with a named perils or all-risk policy is one of the primary ways that you can protect your small business from the hazards it might face. But it’s not the only type of insurance you’ll likely require.
For instance, you need general liability insurance to shield yourself from liability claims, such as third-party bodily injury or third-party property damage.
That’s where Thimble can help.
We’re the newer, better, easier, more affordable way to protect your small business from the liability it faces. In less than 60 seconds, you can purchase an on-demand general liability policy by the hour, day, or month. It’s flexible insurance tailored to you. Just download the Thimble app or click “Get a quote” to get started.
Just like your risk assessment identifies what named perils you need, we make sure your policy is right for you. Get general liability insurance with Thimble.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.