State Farm Insurance License Practice Exam

Which type of insurance policy protects against losses caused by perils not specifically excluded?

1. Open Peril Coverage

2. Named Peril Coverage

3. Liability Insurance

4. Supplemental Coverage

The correct answer is: Open Peril Coverage

Open Peril Coverage is a type of insurance policy that provides protection against losses resulting from any peril that is not expressly excluded in the policy. This means that unless a specific hazard is listed as an exclusion, any damage or loss that occurs will generally be covered. This broad approach to coverage is beneficial because it alleviates the need for the policyholder to remember a long list of perils that are covered, providing peace of mind knowing that most risks are included unless stated otherwise. In contrast, Named Peril Coverage specifically lists the perils that are covered, meaning if a loss occurs due to a peril that is not on the list, it would not be compensated. Liability Insurance focuses on covering legal liabilities resulting from injuries or damages caused to others, rather than protecting the policyholder's own property or interests directly from perils. Supplemental Coverage typically refers to additional insurance purchased to cover additional risks that are not included in a standard policy, which does not convey the broad protective features of Open Peril Coverage.