Do You Need an All-Risk Insurance Policy?

Man and woman in home wondering what kind of insurance they need
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An all-risk insurance contract or "open perils policy" covers and protects you from all risks or perils that could damage your home or contents and personal property. Any exception must be spelled out in the policy. This differs from a standard H0-3 homeowner policy because the H0-3 policy covers only named perils on contents. An all-risk insurance policy that covers all risks on both home and personal property is also known as "open perils" or "comprehensive form" insurance. HO-5 is an example of an open-perils, all-risk comprehensive insurance policy.

A named perils policy covers only the risks listed on the policy. A combination policy, meanwhile, provides all-risk coverage on your home but covers only the named perils on your belongings.

Key Takeaways

  • An all-risk policy will cover any damage that is not specifically excluded in the policy.
  • The type of coverage you choose will impact how much you get paid in a claim, and whether your damage will be covered.
  • All-risk coverage may apply to the building only but not its contents.
  • Ask wherher the coverage is "all-risk on building and contents" to avoid confusion.

Here's When an All-Risk Policy Makes a Difference

Say a friend comes over to help you install a TV in your den. They drop the TV, damaging both the TV and the floor. An all-risk policy would cover the damage to both, because it was sudden and accidental, and not excluded. On the other hand, a named-perils policy that covers only fire, smoke damage, lightning, and frozen pipes would not cover the damages to either the floor or the TV.

All-risk policies cost more than H0-3 Broad form or named peril policies. Prices can vary greatly depending on your personal information, what is being insured, where you live, and many more factors. Shop around with insurance providers for specific quotes.

Having coverage for all risks means that if you need to make a claim due to sudden or accidental damage, you would be covered unless the insurance company proves the damage resulted from something that is excluded or limited.

All-Risk Home Insurance: What Coverage Do You Need?

Both the HO-5 and the HO-3 policies cover all risk or open perils coverage on your building.

However, the HO-3 only covers named perils on contents. This means that your coverage on your personal property will be limited if you take a form that does not cover all risk on personal property. Before choosing your home insurance, look at what shape you would be in if something were to happen to your home and belongings and you were to find out that you were not insured for all risks. If the price is a concern, consider increasing your deductible to save money on your premium.

What's Left Out of All-Risk Coverage?

An insurance company may choose to include more coverage on its all-risk policy by limiting exclusions as a value-added perk. High-value home insurers, for instance, often do this. In general, though, some common items and risks are excluded from coverage:

  • Damage caused by rodents or pests
  • Some types of water damage including sewer backups
  • Earth movement
  • Flood
  • Nuclear incidents
  • Acts of terrorism
  • Breakage of fragile items
  • Mechanical breakdown
  • Pollution
  • Wear and tear
  • Hidden or latent defects
  • Gradual damage

According to the Insurance Information Institute, 6%  of insured homes had claims in 2017, the most recent year for which there is data.

Although you may not be one of the ones who file a claim this year, it is important to review your coverage each year so that when you do have a claim, you don't have any surprises.