All-Risks Coverage

What Is All-Risks Coverage?

All-risks coverage provides coverage for any incident that an insurance policy doesn’t specifically exclude. All-risks coverage, also called all-perils coverage, offers much broader protection than any named risks coverage. Named risks coverage only covers incidents the policy specifically includes. 

However, the wording of “all-risks coverage” is somewhat misleading because all insurance policies contain numerous exclusions. As a result, most insurance policies tend to avoid using this language to describe their policies. It is more common for insurers to use terms like “special perils coverage” to describe this type of insurance policy. For an "all-risks" type of coverage, it is typically the insurer’s responsibility to prove that the claim is not covered (rather than the insured’s responsibility to prove that the claim is covered).

How All-Risks Coverage Works

A personal liability umbrella insurance policy, which covers large-dollar claims and certain incidents that homeowners and automobile insurance do not, is a type of insurance that might be considered to provide all-risks coverage. However, personal liability umbrella policies still exclude certain incidents, such as intentional damage, business liability, damage to your own property, and damage resulting from acts of war, among other exclusions. These policies do cover everything else the policy is written to cover—that is, incidents related to personal liability.

As a general rule, Insurance providers generally offer two types of property coverage for homeowners and businesses–named perils coverage and all-risks coverage. A policy with “all-risks coverage” will not actually cover any type of loss. Insurance policies are typically designed to cover specific situations and will, therefore, list many incidents that aren’t covered. The most common types of perils excluded from all-risks coverage include earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, nuclear hazard, and market loss.

However, an individual or business that requires coverage for an excluded event under an all risks coverage policy usually has the option to pay an additional premium, known as a rider or floater, to have the specific peril included in the contract.

It is important for consumers to keep in mind that all-risks coverage doesn’t mean you can use your umbrella policy to pick up where your health insurance coverage falls short; an umbrella policy won’t cover your medical treatment.

All-Risks Coverage vs. Named Perils Insurance

A named perils insurance contract only covers the perils specifically stipulated in the policy. For example, an insurance contract might specify that any home loss caused by fire or vandalism will be covered. Therefore, an insured individual or entity who experiences a loss or damage caused by a flood cannot file a claim to their insurance provider (because a flood is not named as a peril under the insurance coverage). Under a named perils policy, the burden of proof is on the insured.