All Risks Coverage

Insurance coverage that automatically includes any risk not explicitly excluded is referred to as “all risks” coverage.

What Is All Risks Coverage?

All risks is a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For instance, in the case of an all-risks property insurance policy, if it does not expressly state that the property is not covered for flood damage, then it is covered for such an event. This policy is often only found in the property-casualty market.

Understanding All Risks Coverage

Insurance providers generally offer two types of property coverage — all risks and named perils. Named perils insurance only covers the events mentioned in the policy. For instance, the insurance policy could state that only losses due to vandalism or fire are covered. As a result, a covered person who experiences damage or loss due to flooding is not assisted as flooding is not covered as a peril in the policy. The burden of proof lies on the insured person.

All risks insurance covers all perils, except the ones excluded from the list. Thus, anything not named in the exclusion list is covered automatically.

Burden of Proof

To trigger coverage under an all-risks policy, there has to be proven physical loss or damage to the property. An insured person must prove that there is physical damage or loss. The insurer then has to prove that an exclusion applies to the coverage in a certain case.

For instance, a small business could file for an insurance claim after experiencing a power loss. However, the insurer could counter and reject the request by stating that the loss of income was from a loss of power, which is not the same as a physical loss of property.

Special Circumstances

Since all-risks insurance is comprehensive, it is priced higher than other policies. Therefore, it is important to weigh its costs against the probability of a claim arising. It is also possible to have a combination of perils and all risks in one policy. So, when signing up for a policy, read the form to understand what is included or excluded.