State Farm Insurance License Practice Exam

Which of the following best describes coverage under a named peril policy?

1. Coverage for any loss not specifically excluded

2. Insurance coverage for a wide range of risks

3. Only coverage for perils specifically listed in the policy

4. Blanket coverage across various assets

The correct answer is: Only coverage for perils specifically listed in the policy

A named peril policy specifically outlines the perils that are covered within the policy document, meaning that it provides coverage only for the risks that are explicitly listed. This approach contrasts with an all-risk or open peril policy, which generally covers all risks except for those specifically excluded. Named peril policies are beneficial for clients who want to know the precise hazards they are protected against, allowing for clear understanding and expectations regarding their coverage. The clarity of coverage in named peril policies is particularly advantageous for consumers, as it reduces ambiguity about what is included in their insurance plan. While other options mention broader coverage or exclusions, they do not accurately reflect the essential characteristic of a named peril policy, which is to list and limit coverage to those specifically named risks.