In a standard property insurance contract, there are standard stipulations about what is covered. Then there are situations where your protection is excluded. The incidents where coverage is implemented are known as open perils.
Open Perils Policies Offers All-Risks Coverage
Within a commercial property policy, open perils are the incidents that are covered due to some form of damage. The exception to this is items that are deemed as exclusions. To provide further detail, a commercial policy would cover damage to property unless it was due to something specifically mentioned. For instance, the property might not be covered in the event of an earthquake or mudslide.
Open Perils vs. Named Perils
An open perils policy doesn’t specifically describe the situations where coverage is permitted. However, a named perils contract names each of the situations that are covered. The latter tends to be less expensive because it can be customized by the policyholder. Open Perils cost more since they offer coverage for events the business may never encounter.
Generally, an open perils policy is recommended. Though named perils can save a business money, a situation might arise that isn’t listed.
These are some of the most common exclusions in an open perils policy:
Water damage from man-made or natural incidents
Power and mechanical failures
Internal theft or vandalism
Damage from insects or animals
This isn’t to say that these situations are uninsurable. Rather, coverage for these incidents must be purchased separately.
A policyholder must save all of the necessary paperwork and evidence for an open perils policy. Depending on the situation, the insurer may try to prove that the incident was part of the excluded perils list. If the policyholder offers evidence countering this, then the insurer has no choice but to pay the claim.
This is one reason why open perils insurance is generally better than named perils. In the latter, it’s up to the insured to prove they have coverage. If they don’t have the necessary information, the responsibility of payment falls on them.