Conceptin Property insurance basics
Drill8 items
Named perils vs open perils
A named-perils policy covers only the causes of loss it lists. An open-perils policy covers any direct physical loss the form does not exclude. The difference also moves the burden of proof: the insured proves a listed peril, the insurer proves an exclusion.
A list or a set of exclusions
One line of the insuring agreement tells you the approach. Basic and broad forms name their perils, and a loss from anything off the list sits outside the policy whether or not an exclusion mentions it. The special form insures against risk of direct physical loss and then carves out exclusions such as wear and tear, flood, earth movement and mechanical breakdown. Both approaches appear across the dwelling, homeowners and commercial forms, which is why this idea sits in property insurance basics before any single form.
The shape decides who proves what. Under named perils the insured shows that a listed peril caused the loss. Under open perils the loss is covered unless the insurer shows an exclusion applies.
One accident, two answers
A moving crew drops a can of paint in a furnished rental house that the landlord insures on a DP-3. The stained hardwood floor is part of the dwelling, Coverage A, which is open perils: spilled paint is not excluded, so the floor is covered. The landlord's sofa is personal property, Coverage C, which the DP-3 covers on broad named perils. Spilled paint is not on that list, so the sofa is not covered. The homeowners forms make the same split in their own way; HO-3 vs HO-5 compares them.
The words that tell you the approach
- Named perils
- Coverage for the causes of loss the form lists, and nothing else.
- Basic form
- The short list. On commercial property (CP 10 10): fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse and volcanic action.
- Broad form
- The basic list plus falling objects, weight of snow, ice or sleet, and water damage (CP 10 20), with collapse as an additional coverage.
- Open perils
- Also called special form, and all-risk in older wording: any direct physical loss is covered unless excluded. The name never means unlimited.
- Exclusion
- The clause that does the work under open perils. Flood, earth movement and mechanical breakdown are excluded on every ISO commercial causes-of-loss form, special included.
Which approach each form uses
| Form | Building | Personal property |
|---|---|---|
| DP-1 | Basic named perils | Basic named perils |
| DP-2 | Broad named perils | Broad named perils |
| DP-3 | Open perils | Broad named perils |
| HO-3 | Open perils | Broad named perils |
| Commercial property | Basic, broad or special form, as chosen | Same form as the building |
Working a covered-or-not item
Find the approach
A form name or a coverage letter settles it; the table above maps each one, and DP-1 vs DP-2 vs DP-3 goes deeper on the dwelling forms.
Ask the matching question
Named perils: is this cause on the list? Open perils: is this cause excluded? Each approach has only its own question.
Place the burden
Under a list, the insured shows a listed peril caused the loss. Under open perils, the insurer shows an exclusion applies.
Listed, or simply not excluded?
0 of 8 answered · 0 right
The approach hides in a form name or a coverage letter; name it before weighing the cause of loss.
Notes on each optionCommit to an answer first. The notes under the item then open on every option: what rules it in or out, and the one word that splits the runner-up from the key.
- Item 01
Which statement about an open-perils (special form) property policy is CORRECT?
- AProving a listed peril caused the loss is the insured's burden under a named-perils form, not an open-perils form.
- BCovering only the listed causes describes a named-perils form.
- C'Without exclusions' overreaches; open-perils forms still exclude flood, earth movement and more.
- DCorrect: an open-perils form covers any direct physical loss not specifically excluded, and the insurer must prove an exclusion applies.
- Item 02
A named-perils property policy has a loss from a cause that is neither listed as a covered peril nor specifically excluded. The loss is:
- AValuation has nothing to do with it; a cause that isn't listed isn't covered at any value.
- B'Covered unless excluded' is the open-perils rule, not the named-perils rule.
- CCorrect: a named-perils form covers only the causes it lists, so an unlisted cause isn't covered even if it isn't excluded.
- DPutting the burden on the insurer is the open-perils approach.
- Item 03
When property is insured on an open-perils basis, who must prove whether a loss is covered?
- AThis reverses the burden; under open perils the insurer, not the insured, must prove an exclusion.
- BCorrect: under open-perils coverage every direct physical loss is covered unless excluded, so the insurer must prove an exclusion applies.
- CAn umpire settles disputes over the amount of loss in appraisal, not whether the loss is covered.
- DProving a named peril is the insured's burden under named-perils coverage, not open perils.
- Item 04
A client with an ISO HO-3 says his neighbor has 'all-risk' coverage on his house and he wants the same. How should the agent respond?
- AThe DP-1 is the narrowest named-perils dwelling form, the opposite of all-risk.
- BCorrect: 'all-risk' is the older name for open perils, and the HO-3 already covers his dwelling that way.
- CThe HO-3 dwelling coverage is already open perils, so no endorsement is needed for the house.
- DThis reverses the terms: all-risk means open perils, the opposite of named perils.
- Item 05
Under the ISO HO-3, personal property (Coverage C) is covered for all of the following named perils EXCEPT:
- AVandalism or malicious mischief is a Coverage C named peril, so it cannot be the EXCEPT answer.
- BWeight of ice, snow or sleet is a Coverage C named peril, so it cannot be the EXCEPT answer.
- CCorrect: flood is not a named peril and is also excluded, so it needs NFIP or private flood coverage.
- DFalling objects is a Coverage C named peril, so it cannot be the EXCEPT answer.
- Item 06
Which loss to personal property is covered under the named perils of an ISO HO-3?
- ADamage by the insured's own animals isn't a Coverage C named peril.
- BEarth movement, including earthquake, is excluded in Section I.
- CFlood, including a flash flood, is excluded in Section I.
- DCorrect: sudden bursting of a heating system and accidental discharge of water are Coverage C named perils.
- Item 07
Which peril is covered under a broad form named-perils property policy but NOT under a basic form?
- AVandalism or malicious mischief is already a basic-form peril.
- BCorrect: weight of ice, snow or sleet is one of the perils the broad form adds to the basic list.
- CWindstorm or hail is already a basic-form peril.
- DSmoke is already a basic-form peril.
- Item 08
A store insured under the Causes of Loss–Special Form (CP 10 30) has each of the following losses. Which one is covered?
- AMechanical breakdown is excluded under CP 10 30; it belongs under equipment breakdown coverage.
- BWear and tear is excluded under CP 10 30, because it isn't an accidental loss.
- CFlood is excluded on all ISO causes of loss forms, including the special form.
- DCorrect: the special form covers direct physical loss unless excluded, and a sudden pipe burst isn't excluded.