What is all-risk insurance?
Fact-checked with HomeInsurance.com
When you purchase home insurance, you can choose an all-risk or named perils. All-perils policies, also called open perils or HO-5 policies, offer the most comprehensive coverage. If you’re looking for the highest level of protection for your home, consider an all-risk policy.
What is an all-risk policy?
An all-risk insurance policy covers any peril not explicitly excluded from your home insurance policy. Unlike the name suggests, an all-risk policy doesn’t cover you in all situations.
For instance, if your home sustains extensive water damage and your policy doesn’t exclude water leaks from the list of covered perils, you would be covered. However, if your home sustains earthquake damage and earthquakes are written out of your policy, you would not be covered.
Any risk insurance may include coverage for both your home and your personal belongings, as long as the damage is sudden or accidental. HO-5 policies cover your home and belongings from all-risk perils, whereas an HO-3 policy only covers your belongings from named perils.
The main benefit of an all-risk policy is that it offers a high level of coverage. However, there are a handful of circumstances that are almost never covered under all-risk policies, including:
- General wear and tear
- Lack of maintenance or negligence
- Broken equipment, appliances or machinery
- Rodent or pest damage
- Sewer backups
- Terrorist attacks
- Nuclear destruction
If you have an all-risk policy and need to file a claim, your insurance company will assume the burden of proof. Essentially, that means your insurance company will investigate the claim and determine if the cause of the loss is excluded from your policy.
Some homeowners with open-perils insurance will still want coverage for excluded perils, like floods or earthquakes. In that case, you can purchase endorsements to expand or increase your coverage.
What’s the difference between an all-risk policy and a named-perils policy?
The difference between named-peril vs. all-risk policy is easy to remember. A named-perils policy is somewhat the opposite of an all-risk policy. A named-perils policy only covers your home and belongings from a specific list of perils. The list of covered perils is generally consistent among most insurance providers. Some examples of covered perils in a named perils policy are fire, theft, vandalism, hail and wind damage.
Because all-risk property insurance policies offer broader coverage, they are more expensive. By default, most standard homeowners insurance policies are named perils policies, so you’ll have to notify your insurance provider if you want an all-risk policy.
Another key difference between all-risk and named-perils policies is where the burden of proof lies. With a named-perils policy, the burden is on the homeowner to show evidence that the loss was caused by a peril listed in their policy. With an all-risk policy, the burden falls on the insurance company to prove the cause of the loss is excluded from the policy.
Should you get an all-risk policy?
There are both pros and cons to all-risk insurance, and some homeowners will benefit more than others from this type of policy. To determine if you should get an all-risk policy, consider the following:
- How much money are you willing to spend? An all-risk policy is more expensive than a named-perils policy, and it won’t cover you in every situation. For instance, if you live in an earthquake zone, you’ll still need to purchase an earthquake insurance policy.
- How much risk does your home have? A house in a flood or hurricane zone faces a much higher amount of risk than a home in a landlocked state. In case of an unexpected situation or a freak accident, an all-risk policy is more likely to cover the extent of the damage.
In comparison, homeowners who don’t face a lot of risk can typically suffice with a named perils policy. Named-perils policies offer less protection, but they still cover the most common types of losses homeowners experience.
If you’re trying to save money and don’t care about the extra coverage, opt for a named perils policy.
- All-risk and named-perils policies are options for your homeowners insurance.
- All-risk policies cover your home and belongings from any peril not specifically excluded from your insurance policy.
- Named perils policies cover your home and belongings from a specific list of events written in your policy.
- Named-perils policies are cheaper than all-risk policies, but they offer less coverage.
An all-risk home insurance policy offers the most protection for the structure of your house and your personal belongings. However, an all-risk policy does have exclusions. For instance, general wear and tear, sewer backups and pest damage are usually not covered.
If you want the added protection, an all-risk policy can be worth the cost. However, homeowners who don’t face significant risk can get adequate coverage from a named perils policy, which is less expensive. Most standard homeowners insurance policies are named perils policies by default, so you’ll have to upgrade if you want an all-risk policy.