Comprehensive Protection Approach
An "all-risk" insurance policy (now more commonly called "open perils" or "special perils" coverage) provides protection against all causes of loss except those specifically excluded in the policy. This contrasts with "named perils" policies that cover only losses explicitly listed in the policy documents. The all risk approach creates a significantly broader safety net by shifting the burden of proof—the insurer must demonstrate that a specific exclusion applies rather than the policyholder having to prove the loss falls under a covered peril.
Common Exclusions to Understand
Despite the comprehensive-sounding name, all risk policies still contain important exclusions. Typical exclusions include:
- Flood damage (usually requires separate flood insurance)
- Earth movement (earthquakes, sinkholes, landslides)
- Nuclear hazards or war
- Intentional damage
- Normal wear and tear
- Mechanical breakdowns
- Insect/vermin damage
- Pollution or contamination
These exclusions vary by policy and insurer, making careful review essential.
Commercial vs. Personal Applications
In commercial insurance, all risk policies provide businesses with broad protection for buildings, equipment, and sometimes inventory. For personal insurance, homeowners' HO-3 and HO-5 policies typically use the all risk approach for the dwelling itself, though personal property may have more limited coverage unless specifically upgraded.
Benefits Over Named Perils Coverage
All risk coverage provides significant advantages through:
- Protection from unforeseen or unusual loss scenarios
- Coverage for emerging or uncommon risks
- Fewer coverage gaps
- Simplified claims process for most incidents
- Greater peace of mind for complex property protection
Premium Considerations
The expanded protection of all risk coverage typically comes with higher premiums than named perils policies. However, the price differential often represents excellent value given the substantially broader protection, particularly for high-value properties or those with unique risk exposures.
Enhancing Protection Further
Even with comprehensive all risk coverage, policyholders should consider endorsements or separate policies for excluded perils relevant to their situation, particularly flood insurance in flood-prone areas or earthquake coverage in seismically active regions.