South Carolina Personal Lines Practice Exam

Why are open peril coverages typically considered more comprehensive?

1. They cover only named risks

2. They provide broader protection against risks

3. They are cheaper than named perils

4. They cover personal property only

The correct answer is: They provide broader protection against risks

Open peril coverages are considered more comprehensive because they provide broader protection against a wide range of risks. Unlike named perils policies, which specify particular risks that are covered, open peril policies generally protect against all risks that are not specifically excluded in the policy. This means that if an event occurs that is not listed as an exclusion, the insurer is likely to cover the damages. This type of coverage is advantageous for policyholders because it simplifies the claims process; they do not have to prove that a specific named peril caused the loss. Instead, they can focus on the outcome itself, knowing that the burden of proof lies with the insurer to establish that an exclusion applies. Consequently, open peril coverages tend to offer more extensive protection, which is why they are often preferred by those looking for comprehensive insurance solutions.