All Risk Policy in Insurance

What is All Risk Policy?

All risks policy is a type of insurance coverage that automatically covers any arising incident or risk that has the potential to cause damage to your home or the contents and personal property inside your household.

For example, if you look in your all risks homeowner’s policy and it does not clearly state that earthquakes are not covered, then it’s safe for you to assume that your property will be covered in the event of an earthquake.

However, the policy is only effective if the risk you seek cover is not explicitly omitted under your insurance’s terms and conditions.

Frequently referred to as all-perils coverage or comprehensive form, this type of cover offers a broader scope of protection than a named risks/perils coverage policy. Named perils coverage only covers risks that are detailed in the policy.

Interesting Fact: Even though many industry professionals still use the term ‘all risks’ to describe the policy, it is no longer used in insurance policies, as the word all suggest coverage is limitless. Some industry practitioners have adopted the term open perils or special perils.

Named Perils Insurance: Differences

Unlike all-risk policies, a named perils contract only covers the risks stipulated in the policy. Therefore an insured person or entity who faces a loss must ensure the peril that causes the loss is started within the policy.

Under the named perils policy, the burden of proof is on the insured. The burden of proof is a legal requirement stating that a person making a claim can prove that the facts and evidence presented are validated.

The burden of proof guidelines is intended to make certain legal decisions are made solely based on facts instead of conjecture.

All Risk Policy- What is it?

Insurance companies offering homeowners and businesses cover usually provide customers with two types of property cover- named perils and all risks.

As mentioned above, named perils only cover risks identified clearly within the policy, whereas all risks name the perils that are not covered in their policies.

A business or individual seeking coverage for any risk that is excluded from the all-risks policy- may be offered the option to pay an additional premier, referred to as a floater or a rider, to include the once excluded peril in the contract.

Typically, the most common perils that are excluded from “all risks” policies include:

•      War
•      Government seizure or destruction
•      Earthquakes
•      Infestation
•      Nuclear hazard
•      Pollution
•      Wear and tear
•      Market loss

When Do All-Risk Policies Make a Difference

Although all-risk policies are more expensive than homeowners’ insurance (H0-3) policies or named policies, having all risks cover means that if a reason arises where you need to file a claim because of sudden or accidental damage, you will be covered unless it can be proved by the provider the damage resulted from an excluded peril.

Prices for all-risk policies vary immensely depending on a few factors including, personal information, where you live, what is being insured, plus many others. You must check out several insurance companies to match yourself with a suitable provider at a manageable cost.

For example, if a friend offers to help you put up a new kitchen cabinet, the cabinet falls, causing damage to the new cabinet and flooring. The all-risks policy would cover both the cabinet and floor because it’s deemed accidental and sudden damage and not an excluded peril.