Buying insurance is an essential step toward protecting the property you insure and your other assets that might otherwise be vulnerable when someone makes a claim against you. But many types of insurance come with limits that leave you without adequate coverage in certain situations. All risk insurance offers a high level of coverage by including risks that other forms of insurance leave out.
The term all risk insurance, or all risks insurance, refers to an insurance product that provides coverage for all causes of damage other than those specifically named and omitted in the policy documents. It is usually among the broadest types of coverage an insurance company offers. Instead of naming specific sources of damage it will cover, insurance buyers can assume that an all risk policy covers any risk that isn't explicitly left out of the coverage, making it easier to ensure that a policy will apply to the most likely types of claims.
Several different types of insurance include all risk policy options. One example is auto insurance, where all risk coverage in the comprehensive portion of the policy covers the majority of non-driving damage, including damage from storms, fire, theft, vandalism and natural disaster. An all risk homeowners insurance policy would pay for repairs to the home, or rebuilding, except for in cases stated in the policy. Those risks usually include location-specific risks, such as floods and earthquakes. Everything else, from fires to nuclear accidents and volcanoes, is covered by an all risk homeowners insurance policy.
All risk insurance doesn't lose its all risk designation because of the number of types of risks it specifically excludes. To not be considered an all risk policy, insurance would need to name specific risks that it does cover rather than listing the risks that are exempt from coverage. Exemptions usually include things that are difficult to predict or that require special coverage. For example, the National Flood Insurance Program allows homeowners insurance providers to exclude flood as a risk in their all risk policies. Home owners who want flood coverage can buy it from an authorized insurance company while receiving coverage for other dangers in an all risk policy.
Pros and Cons
All risk insurance has benefits and drawbacks for customers. The key advantage is the fact that an all risk policy removes all doubt as to what is and is not covered. It also provides additional peace of mind and protects the policyholder's valuable property. However, all risk insurance usually comes at a higher price than insurance with less comprehensive coverage. All risk policies include coverage for extremely unlikely events, many of which will never occur, raising the cost of premiums. It may also provide a false sense of security even though it still omits certain risks and does nothing to decrease the likelihood of a disaster occurring.