What is a key characteristic of ‘named peril’ insurance policies?

Named peril insurance policies are defined by their coverage of only specific risks that are explicitly listed within the policy document. This means that if a risk or peril is not named in the policy, it is not covered. This approach allows policyholders to understand exactly which events are protected and can lead to more affordable premiums since the insurer's exposure to risk is limited to just those named perils.

For instance, a named peril policy might cover risks such as fire, theft, or vandalism. If a homeowner experiences damage from a peril that is not mentioned in the policy, such as an earthquake or flood, they would not be able to claim compensation. This characteristic contrasts with "all risks" or "open peril" policies, which cover a broader array of potential risks unless specifically excluded.

The other options reflect misunderstandings of what named peril policies entail. They do not cover all risks associated with the property, they aren't inherently more expensive than open peril policies, and the coverage limits are not necessarily lower as this can vary based on the individual policy terms and the property being insured.