This is in contrast to the standard “named perils” insurance, which specifically lists losses that will be covered. The insurance industry is moving away from use of the term “all risk,” as it can be confusing to consumers. “Open perils” and “special perils” are now more commonly used instead. A peril is an unexpected occurrence, such as a thunderstorm, that can cause property damage or loss.
How All-Risk Insurance Works
Standard home and property insurance policies usually are named-perils policies, and typically cover damage caused by hail, snow, ice, windstorms, and other acts of nature as well as losses due to fire, vandalism, or theft. These will be clearly stated as covered in the policy. Coverage for flooding or earthquake damage is usually not included in these policies, but coverage for these events can be purchased in addition to the standard policies. Named-perils policies often also include some liability coverage should someone be injured on your property. With an open-perils policy, all storm-related losses to a dwelling or other structures, such as fencing, a guest cottage, or a detached garage on your property, would be covered from loss unless those structures were specifically listed as exclusions in the policy. You also can purchase a combination of the two types of policies.
Example of All-Risk Insurance
To illustrate the difference between the two options, let’s look at an example. Two small business owners have commercial properties. Both properties are damaged when a powerful hailstorm comes through their town. The first owner has a standard named-perils policy that lists hailstorm damage as a covered peril. Therefore, damage to the property’s roof is fully covered. The second business owner’s property, which is covered by an all-risk or open-perils policy, also has damage to the roof. However, the fence surrounding the property was also bent and damaged by the storm. The roof was damaged, the building was uninhabitable, and employees were not able to work for two days. The damage to the roof, the damage to the fence, and the employees’ lost wages would be covered under the all-risk or open-perils policy unless they were specifically listed as exclusions in the policy. Because of the expansive nature of the open-perils coverage, you can expect to pay more for these policies.
Types of All-Risk Insurance
Some all-risk or open-perils insurance policies have limits. For example, they may not cover damage caused by mold, flaws in the foundation of a home or building, normal wear and tear, floods, earthquakes, or sewer backups. Named-perils policies may be less expensive, but it is important for you to know the specific perils you are insured against, as some policies will only cover a single event, so you may be left at risk of paying for expensive repairs and replacements. These limits to both options point out the need to customize your property policies based on your personal and professional needs. Types of additional insurance coverages to consider include:
Loss of use coverage: Covers hotel fees if the property damage prevents you from being able to stay at home or use your workplace Personal property coverage: For damaged personal items such as clothing and electronics Personal liability coverage: Protection for legal action taken against you or a family member Dwelling coverage: Covers the repair or rebuilding of your home or office Other structures coverage: Covers other structures on the property such as sheds, fencing, or a detached garage
