Which type of insurance only covers specific risks stated in the policy?

A named perils policy is designed to cover only those specific risks or perils that are explicitly listed in the insurance contract. This means that if a risk is not mentioned in the policy, coverage for that risk will not be provided. For example, if the policy states it covers fire, theft, and vandalism, it will not cover any other unexpected events, such as flood or earthquake damage, unless those perils are specifically included in the policy.

This approach offers clarity to policyholders about what is and isn't covered, allowing them to choose coverage that aligns with their specific needs. By knowing exactly which perils are included, consumers can make informed decisions and possibly save on premiums compared to broader policies, which may cover a wider range of potential risks but at a higher cost.