Named Perils Insurance Policy
What it is:
A named perils insurance policy is a policy that covers losses from events specifically named in the policy.
How it works (Example):
For example, let's say John Doe owns a houseboat. His homeowners insurance policy does not cover tsunami damage, so he must get a separate policy to cover any damage he obtains if this occurs. If his boat is damaged by hail, earthquake or theft, the policy does not cover him (though his regular homeowners policy might).
Why it Matters:
Named perils policies address holes in coverage. For example, they may cover flood damage, hail damage or certain kinds of theft. The cost is based on the likelihood that the periloccur and the estimated cost of the damage.