What are the two main types of property insurance policies?

The two main types of property insurance policies are named-peril and open-peril policies. Named-peril policies provide coverage specifically for the risks that are named within the policy. This means that if a peril (such as fire, theft, or vandalism) is not specifically listed in the policy, then it is not covered. In contrast, open-peril policies offer broader coverage by protecting against all perils except those that are explicitly excluded in the policy. This distinction is crucial for policyholders because it dictates the level of protection they have against various risks.

The other choices focus on different aspects of insurance. Flood and earthquake policies refer to specific types of coverage for particular natural disasters and do not encompass the breadth of property insurance types. Commercial and residential policies differentiate between the use of the property but do not represent the fundamental categories of how risk is managed. Lastly, term and whole life policies pertain to life insurance, rather than property insurance, making them irrelevant to this question. Understanding these differences helps in selecting the appropriate insurance coverage for specific needs.