Which two categories define covered perils in property insurance?

• A. Named perils and open perils
• B. Weather perils and non-weather perils
• C. Primary perils and secondary perils
• D. Real perils and personal perils

Answer: (A)

In property insurance, how a loss is covered comes down to the peril coverage form. There are two main ways insurers define covered perils: named perils and open (or special) perils.

With a named-perils policy, the insurer only covers losses caused by specific events that are listed in the policy—fire, lightning, windstorm, hail, explosion, vandalism, and so on. If a peril isn’t on that list, a loss isn’t covered. This makes coverage depend on the exact EVENTS named in the contract.

With an open (special) perils policy, the coverage is broader: all risks of direct physical loss are covered unless a peril is specifically excluded in the policy. This form is sometimes called “all risks” coverage because it isn’t limited to a list of perils.

The other options don’t reflect the standard way property insurance categories are described. Weather vs non-weather, primary vs secondary, or real vs personal aren’t the formal dichotomy used to define covered perils.