South Carolina Personal Lines Practice Exam

What does a named peril policy cover?

1. Only listed perils

2. All perils except named exclusions

3. All risks

4. Only theft-related incidents

The correct answer is: Only listed perils

A named peril policy specifically covers only those risks that are explicitly listed in the policy itself. This means that if a peril is not mentioned among the listed items, then it is not covered by the policy. For instance, if the policy includes fire, lightning, and theft as named perils, it will provide coverage for damages caused by these specific events. Any damage resulting from other perils that are not listed, such as earthquakes or floods (unless explicitly included), will not be covered. In contrast, a policy covering all perils except named exclusions would provide much broader protection but does not pertain to a named peril policy. Similarly, a policy that covers all risks would imply comprehensive coverage, which is not the case for named peril policies. Finally, a limitation to only theft-related incidents means that the policy would focus solely on theft rather than the wider range of perils, which is not characteristic of named peril coverage.