What Is All Risk Insurance?

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It protects the insured from all risks except those listed as being excluded. The policy’s rates and premiums are also flexible. However, it comes with many rules and regulations, such as hidden terms & conditions.

Key Takeaways

  • All risk insurance is a package insurance policy covering maximum risks that others fail to provide. But, some exceptions will give no claim to the insured.The three kinds of all-risk policies include property, industrial, and contractor insurance. All these policies provide coverage against perils like fire, theft, or accidental situations.The insurer will claim 5% of the total insured amount. In other cases, they provide either the actual value or replace the item.This insurance policy will provide no claims if the policyholder fails to report or avoids reducing the risk.

All Risk Insurance Coverage Explained

All risk insurance policy refers to an insurance policy that provides coverage against all sorts of covered risks. However, there are exceptions to it also. Every insurance policy will have some specification that it will protect against. But it will mention what gets excluded from it. For example, the all-risk insurance broker will pay claims for damage to the building, not the individual house furniture. Since the policy mentioned only external buildings, the holder cannot claim damages on the internal components like furniture. 

Physical loss or property damage initiates coverage under an ‘all risk’ policy. Before the insurer demonstrates that a coverage exclusion applies, the insured must establish that physical damage or loss happened.

Hence, although it states to cover all types of risks, every all risk insurance policy has certain inclusions and exceptions. Firstly, let us look at the conditions of the policy:

  • It provides major protection from fire, theft, and accidental situations. The company may pay a claim of only 5% of the total worth of the article or total policy worth. The insured has to take certain steps to mitigate (reduce) the loss.Any of them can cancel the policy within 15 days.In case of exceeding loss more than the insured policy, the policy owner has to suffer the loss (difference).

However, they include certain exemptions or exceptions too. Examples include damage caused by cleaning, bleaching, dyeing, repairing, restoring, and loss from any nuclear weapon material. Intentional breakage or damage will not attract any claim. Besides, any losses arose due to strikes, riots, war, and similar things. Therefore, all risk insurance groups play a major role in covering these risk types.

Industrial All Risk Insurance

An Industrial all risk policy refers to insurance that focuses more on industry or factory. Every business has the threat of material damage, breakdown of machinery, and other risks. As a result, this insurance policy protects the components within and outside the factory. Also, it safeguards the machinery and materials within the factory.

Among the key benefits, it provides a wide range of protection against several threats like fire and theft, unlike other policies. In addition, the industrial all risk policy also covers the losses during a business halt.

Let us look at the industrial all risk insurance group guidelines that are essentially important:

  • The company’s responsibility for any article or pair of articles shall not exceed 5% of the entire sum insured under the policy unless expressly and separately stated.The policy covers all risks and perils except those excluded.Any damage to the materials or assets like building, factory, or inventory is a part of the insurance. The insured can get claims against them. During the business interruption, all risk insurance brokers provide coverage against it.

However, the policy will not provide coverage in certain cases, as mentioned in the following exclusions:

  • Defective or wrong material design.Wear and tear of the products or materials.Cracks or collapse of the factory building.Rust, corrosion, and weight loss are excluded from the policy.Any theft or burglary to the industrial factory.Wrong faith or dishonesty while stating the facts.Shortage of inventory within the industry.Intentional losses made by the staff.Loss in the market share or industry.War, conflicts within states or nations.Destruction of property due to government order.

Property All Risk Insurance

Property or asset all risk insurance aims at protecting the assets and properties. It includes stock, land and building, furniture, machinery, and other assets. Although it seems similar to the industrial policy, they differ hugely. While the latter focuses more on business and factory components, the former can include office premises also. Thus, machinery might involve computers, printers, scanners, and other assets.

The asset all risk insurance brokers provide coverage against maximum risks, but it excludes or omits some. The insured can claim an amount equal to the actual value or request a replacement. The insurance premium depends on the quality of the assets and the level of risk involved. Also, there is an option of compulsory deductible available to the policyholder.

Simply put, the policyholder can opt for a high deduction where fewer premium rates will be applicable. Besides, in the event of loss, the insured must immediately inform the insurer. Also, take immediate effect to reduce the risk. But first, let us look at the risks covered in the policy:

  • Any damage caused by fire, theft, lightning, or explosion.Theft or burglary of stocks or assets within the premises.Overflow or bursting of water sprinklers. Or any damage to the premise furniture.Coverage against riots, strikes, or any material explosion.Protects against natural calamities like floods, volcanic eruptions, tsunamis, and others.

However, the policy does include certain exceptions. Let us look at them:

  • Wear and tear, depreciation of the assets.War or nuclear risks.Any damage caused while cleaning, drying, dyeing, or restoring the asset.Scratch or any brittle substance used on the surface.

Contractors All Risk Insurance

Contractor-all risk policy refers to insurance where the insurer provides protection against risks to the workers and the contract site. Simply put, it protects the insured during the construction period. This type of insurance includes only contractual and site work. It includes constructing commercial and residential buildings, dams, bridges, roads, sheds, and factories.

The policy also provides legal coverage to the third party during construction. Besides, the policyholder must pay an installment premium for more than 12 months of project duration. Therefore, it proves helpful to civil engineers, architects, and consultants. Also, the contractor can avail of the policy’s benefits from the start till the end of the project. Now, let us look at the components of this policy:

  • Damage caused by fire, lightning, explosion, and aircraft damage.Natural calamities like floods, storms, earthquakes, or landslides.Theft and robbery of the site assets and materials.Lack of skill or collision.Terrorism, protection of the surrounding property, overtime wages of workers, and others.

However, the contractor’s all risk policy has certain exceptions. Let us look at them:

  • War, conflicts, nuclear, or radioactive element risk.Wear and tear, depreciation, or decay of the materials.Faulty design or damage caused due to bad quality materials.Loss of revenue and delay penalties.Inventory losses or purposely negligence by the workers.No attempts have been made to reduce the risk.Damage to the car, vehicle, or cargo.Loss due to misplacement of cheques, bills, notes, currency, debt notes, and others.

This article has been a guide to what is All Risk Insurance. Here, we explain it in detail with its types of policies for industrial, property, & contractors. You may also find some useful articles here –

Business all risk policy provides coverage against the perils and risks arising from possible business threats like fire, theft, or accidents. However, there are certain exceptions to the policy.

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No, both policies have huge differences between them. General liability insurance provides coverage against injuries and damages to the business. However, the former is a policy that covers maximum risks with few exceptions.

While fire insurance protects against fire breakdown, the latter provides coverage against many risks like fire, theft, accidents, and similar things.

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