Arizona Adjuster Practice Exam

What distinguishes an open perils policy from a named perils policy?

1. Named perils cover broad risks, open perils cover none

2. Open perils require proof of coverage, named perils require proof of exclusion

3. Named perils require proof of exclusion, open perils place the onus on the insurer

4. Both policies cover the same risks

The correct answer is: Named perils require proof of exclusion, open perils place the onus on the insurer

An open perils policy is designed to cover all risks except those specifically excluded in the policy. This means that in the event of a claim, the responsibility lies with the insurer to demonstrate that the loss is due to an excluded peril. This shifts the burden of proof regarding exclusions onto the insurance company. In contrast, a named perils policy specifically lists the perils that are covered. If a loss occurs as a result of a peril that is not included in this list, the policy will not provide coverage. Therefore, the policyholder must show that the loss was caused by a peril that is explicitly mentioned in the outline of coverage, placing the onus on the policyholder to prove that a covered peril caused the loss. The distinction in responsibilities between policy types illustrates a fundamental difference in coverage scope, emphasizing how open perils policies tend to offer broader protection, while named perils policies are more limited and require verification against listed risks.