All Risk Coverage

All Risk Coverage – Broad Property Protection Explained

In plain language: When it comes to property insurance, all risk coverage is like a broad safety net. It protects policyholders from most damages or losses to their property, unless those damages are specifically excluded in the policy. 

Technical definition: All risk coverage, also known as open perils coverage, is inclusive insurance coverage that protects against any risks of loss or damage to property unless specifically excluded in the policy. Commonly seen in property insurance, including home and commercial property policies, it offers a wider coverage scope than a named perils policy, which only covers the perils specifically stated in the policy. 

What if you could help your clients get a wide range of protection for their property, so they're covered unless the policy specifically says otherwise? That's the reassurance all risk coverage can provide. But, it comes with its unique nuances. 

TL;DR

All risk coverage is property insurance that provides broad protection against most perils, unless specifically excluded. 

In daily agency work, it involves more extensive coverage discussions and careful review of exclusions. 

A common misunderstanding is that "all risk" means "every risk", which is not true. 

A quick win for agencies is educating clients on the scope and limitations of this coverage. 

What Is All Risk Coverage in Insurance?

In insurance, all risk coverage refers to a type of property insurance that covers all risks of physical loss or damage, except for those specifically named in the policy's exclusions. This coverage is contrasted with a named peril policy that insures against a specific list of perils. When risk insurance like all risk coverage is in play, the property owner can be assured of coverage unless a loss is specifically excluded. 

The breadth of an all risk insurance policy can extend beyond common perils like fire or theft to include less common risks, making it popular among property owners who desire comprehensive protection. However, less obvious risks — like insect damage or normal wear and tear — are typically excluded. Thus, understanding the policy exclusions in all risk policies is crucial. 

A note on policy forms: All risk policies, often referred to as open perils policies, are common in property insurance, including both commercial and personal lines. The specific details may vary depending on the policy forms used and the individual carrier. 

Key Related Terms to Know

Named Peril - A type of coverage that protects only against specific risks listed in the policy. It contrasts with all risk coverage which offers more comprehensive protection. 

Exclusions - These are the specific risks or causes of loss that an insurance policy does not cover. 

Burden of Proof - An important concept in insurance, especially relevant in all risk perils cases. If a loss occurs, the burden of proof falls on the insurer to prove any exclusions. 

Wind and Hail Policy - A type of named perils policy that covers only damages caused by wind and hail. Essential for properties in areas prone to such risks. 

Accidental Physical Damage - Unplanned or unexpected damage to property — an example of a high-risk event typically covered under an all risk policy. 

Common Questions About All Risk Coverage

How does all risk coverage differ from named perils policy? 

All risk coverage is more comprehensive, covering any cause of loss unless it's specifically excluded. On the other hand, a named perils policy only covers losses resulting from perils named in the policy. 

For instance, if a named perils policy doesn't list "vandalism", and a break-in results in property damage, the policy won't cover it. But with an all risk policy, the same incident would be covered unless the policy specifically excludes "vandalism." 

What does "burden of proof" mean in relation to all risk coverage? 

"Burden of proof" means that in a dispute, one party — the policyholder or the insurer — must prove their claim. When pertaining to all risk coverage, if a loss occurs, the insurance company usually has the burden of proof to show that the loss falls within the policy's exclusions. 

Do all home insurance policies offer all risk coverage? 

Not all home insurance policies offer all risk coverage. Some may provide named perils coverage instead, which offers protection only for the specific perils listed in the policy. It's essential to carefully review any home insurance policy to ensure it aligns with the homeowner's requirements and risk tolerance. 

Are there any inherent risks associated with all risk coverage? 

Tying in with the principle of burden of proof, the major risk associated with all risk coverage is the potential remove assumptions about coverage. If a dispute about coverage arises (e.g., the insurer claims an exclusion applies), the insurer has the burden of proof to show the loss falls under that exclusion. 

All Risk Coverage vs. Named Perils Policy

At the core, the difference between these forms of coverage is the type and breadth of risks covered: all risk coverage in insurance policies offers a wide umbrella, while named perils policy provides a specific list. 

Real Claim Examples Involving All Risk Coverage

Scenario 1: A photographer returned from a shoot only to find his studio flooded due to a burst pipe. His expensive cameras and lenses were severely damaged. With an all risk coverage policy in force, the damages were covered, minimizing disruption to his business. 

Scenario 2: An unexpected landslide damaged a homeowner's landscaping and part of their home. Although the homeowner had an all risk policy, the insurer denied the claim as the policy excluded damage from landslides. 

Scenario 3: A fire at a boutique resulted in extensive damage to merchandise. The boutique's all risk policy covered the loss, allowing for a smoother recovery and merchandise replacement. 

Limitations and Common Mistakes

All risk coverage is comprehensive, but it's not limitless. Blunders occur when:  

Misunderstanding it as "everything is covered." Policies always have exclusions. 

Overlooking to review the exclusions in all risk insurance policies. 

Failing to promptly update all risk coverage when introducing new assets or risk conditions. 

Overestimating coverage provided by home insurance policies. 

Miscommunication between insurers and insured, leading to incorrect assumptions about the extent of risk coverage. 

How to Explain All Risk Coverage to Clients

Personal Lines client "All risk coverage is like a comprehensive safety net for your property. It covers most things unless they're specifically excluded in your policy. So, you have broader protection." 

Small Business owner "Think of all risk coverage as a broad shield for your business property. Most damages or losses to your property are covered unless the policy specifically lists it as an exclusion." 

CFO or Risk Manager "All risk coverage provides substantial protection against property loss or damage. It's comprehensive so that it covers a wide range of perils unless they're specifically excluded, making it an attractive option for total asset protection."