West Virginia Property and Casualty Licensing Practice Exam

In property insurance, the term "open peril" means what?

1. Only specified perils are covered

2. All risks except those specifically excluded

3. Covers risks that are not physically examined

4. Only personal property is covered

The correct answer is: All risks except those specifically excluded

In property insurance, the term "open peril" refers to a coverage approach that protects against all risks except those that are specifically excluded in the policy. This broad scope means that if a loss occurs for a peril not listed as excluded, the insurance policy will typically provide coverage for that loss. This concept allows policyholders to have a greater sense of security, as many unforeseen risks are covered without needing to list each one individually. Instead, the policy will explicitly outline the exclusions—such as certain natural disasters or specific situations that are not eligible for coverage—leaving everything else covered under the policy. Understanding the implications of open peril coverage is crucial for policyholders, as it affects their decisions regarding risk management and insurance needs. This is in contrast to named peril policies, where only the specific perils listed in the policy are insured against, which can lead to gaps in coverage for various other risks that might arise.