What Is All Risks?

What Is All Risks?

Let me explain to you what 'all risks' means in the insurance world. It's a type of comprehensive coverage in the property-casualty market that protects against any peril unless it's specifically excluded in the policy. This is different from named perils insurance, which only covers the events that are explicitly listed. For instance, common exclusions in all risks policies are things like earthquakes, war, and normal wear and tear. If you want coverage for those excluded items, you can add it by paying for a rider or floater.

Key Takeaways

Here's what you need to know right away. All risks insurance covers any peril that's not explicitly left out, which is the opposite of named perils insurance that only handles the risks it names. You'll often see exclusions for events like earthquakes, war, and nuclear hazards, but you can usually get those covered with extra riders. In an all risks policy, you as the insured have to first prove there's physical damage or loss, and then the insurer has to show that an exclusion applies. Since this coverage is so broad, it generally costs more than named perils, so you should always review the exclusions carefully.

All Risks Insurance vs. Named Perils: Key Differences

Insurance companies typically offer two main types of property coverage for homeowners and businesses: named perils and all risks. With named perils, the policy only covers the specific perils that are listed out. For example, if your policy mentions fire or vandalism, those are covered, but if a flood damages your home, you can't claim it because flood isn't named. Under named perils, the burden of proof is entirely on you, the insured.

On the other hand, an all risks policy covers you from all perils except those specifically excluded. It doesn't list what's covered; instead, it lists what's not. So, anything not on that exclusion list is automatically included. Common exclusions are earthquakes, wars, government seizures, wear and tear, infestations, pollution, nuclear hazards, and market losses. You can pay extra for a rider or floater to cover those excluded events.

Important Note

Just so you're aware, 'all risks' is also referred to as open perils, all perils, or comprehensive insurance.

The Role of Burden of Proof in All Risks Insurance

Coverage in an all risks policy begins with you proving there's been physical loss or damage to the property. Once you show that, the burden shifts to the insurer to prove that an exclusion applies and denies the claim.

Take a small business hit by a power outage as an example. You might file a claim saying there's physical loss, but the insurer could reject it by arguing it's just a loss of income from not using the property, not actual physical damage.

Factors to Consider When Choosing All Risks Insurance

All risks offers the broadest coverage out there, protecting against more potential loss events, which is why it's usually more expensive. You should weigh the cost against how likely you are to make a claim.

Keep in mind that a single policy can mix both types: for example, all risks on the building itself and named perils on your personal property. Always read the fine print to understand the exclusions. Remember, all risks doesn't cover absolutely everything—those exclusions limit the coverage, so check them thoroughly in any policy you're considering.

What Is the Meaning of All Risk?

All risk is an insurance type where a risk has to be explicitly stated as excluded for it not to be covered. For instance, if 'tree damage' isn't listed as an exclusion, then damage from a falling tree would be covered under the policy.

What Are the 4 Major Types of Insurance?

There are insurance products for just about everything, but for most people, the four major types are life insurance, auto insurance, health insurance, and long-term disability insurance—these cover the main risk factors. If you own significant property like a house or valuables such as jewelry or collectibles, you'll need additional policies for those. But if you're renting, you might just stick with these four.

What Are All Risk Perils?

All risk perils is essentially another term for all risks insurance when talking about specific risks. Named perils names what's covered in case of an accident, while all risks assumes all perils are covered unless mentioned as exclusions. True all risks with no exclusions are rare because they put too much risk on the insurer; it's more common to see policies with many perils listed as exclusions.

The Bottom Line

To wrap this up, all risks insurance—also called open perils or comprehensive—automatically covers any risk not explicitly excluded in the contract. It gives you broad protection, letting you claim for unexpected events unless they're named exclusions like earthquakes or nuclear hazards. This type of policy is extensive but costs more than named perils, so review the exclusion list carefully and think about adding riders for extra protection against specific risks.