What Is All Risks Insurance and What Does It Cover?

All risks insurance is a type of coverage that offers broad protection against potential damage or loss to property. Despite its name, this policy does not cover every conceivable risk. Instead, it covers any event or cause of loss unless explicitly listed as an exclusion within the policy document itself.

Defining All Risks Coverage

All risks insurance is often referred to as “open perils” or “special perils” coverage. If a cause of loss is not specifically excluded, it is automatically covered. The policyholder generally only needs to demonstrate that a loss occurred while the policy was active. The responsibility then shifts to the insurer to prove that the damage falls under an exclusion if they wish to deny a claim.

This coverage includes protection against incidents causing physical damage or loss to insured property. Common perils such as fire, theft, vandalism, accidental damage, and certain types of water damage are usually covered. For example, if a homeowner’s policy does not expressly exclude flood coverage, then flood damage would be covered.

Distinguishing All Risks from Named Perils

The fundamental difference between all risks and named perils insurance lies in their approach to what is covered. Named perils policies explicitly list the specific events or causes of loss that are covered. If a peril is not listed, any resulting damage will not be covered. For instance, a named perils policy might cover fire and theft, but not flood if it’s unlisted.

Conversely, an all risks policy covers everything except what is specifically excluded. This means a named perils policy states what is included, while an all risks policy states what is not included.

The burden of proof also differs; with named perils, the policyholder must prove the damage resulted from a listed peril, whereas with all risks, the insurer must prove an exclusion applies. Named perils policies tend to be less expensive due to their more limited scope of coverage.

Understanding Exclusions

All risks policies are defined as much by what they exclude as by what they cover. These exclusions limit the scope of “all-encompassing” coverage. Policyholders should review the exclusion section carefully to understand the policy’s limitations.

Common types of exclusions include events that are typically uninsurable or catastrophic, such as war, nuclear hazards, and governmental actions. Damage from wear and tear, gradual deterioration, or neglect is also frequently excluded, as insurance is designed for sudden and accidental losses, not maintenance issues.

Specific policy exclusions often include perils like flood, earthquake, and mold, which typically require separate policies or endorsements for coverage. Damage resulting from intentional acts by the policyholder or illegal activities are generally excluded.

In some cases, coverage for an excluded peril, such as earthquake or flood, can be added back to the policy through an endorsement or “buy-back” option for an additional premium.

Common Applications and Policy Considerations

All risks insurance is widely used across various sectors. It is prevalent in commercial property insurance, homeowners policies, builder’s risk, and marine cargo insurance. This broad coverage is suitable for contexts involving diverse and unpredictable risks. For businesses, all risks commercial property insurance provides protection for assets like buildings, equipment, and inventory against a broad spectrum of incidents.

Policyholders should review policy documents thoroughly, especially the declarations page and exclusions section. Understanding the policy’s deductibles and limits is important, as these define the financial responsibility of both the insured and the insurer.

Consulting with an insurance professional can help clarify specific coverage needs and identify potential risks that might require additional consideration.