When you purchase a homeowners insurance policy, you’ll be given the option to buy an all risk policy. But what is an all risk policy, and what does it mean to have one?

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What is an all risk policy?

An all risk policy is an insurance policy that covers

all perils other than ones that are explicitly excluded

. In insurance terms, a peril refers to an event that can cause damage to the item being insured. Rainstorms, fires, and theft are all examples of perils on a homeowners insurance plan.

An all risk policy starts from a place of covering you in the event of any peril. Any perils that are not covered are then listed in the insurance plan as "exclusions." Usually an all risk policy doesn’t actually cover all risk—it’s just a comprehensive plan that covers almost all perils. All of the perils that are not covered will be listed in the exclusions, so you know exactly what is covered and what isn't.

All risk policy vs named perils policy

The opposite of an all risk policy is a

named perils policy

. In a named perils policy, your insurance plan will list all of the items that are covered by your insurance, rather than listing the items that are not covered.

Named perils starts from no coverage, and adds on perils, whereas all risk starts from fully comprehensive coverage, and deducts perils.

Benefits of an all risk policy

An all risk policy has one main benefit: It’s very comprehensive. While most all risk policies are not entirely comprehensive (they usually exclude a few uncommon perils), they are far more comprehensive than a named perils policy.

Named perils will only cover you for events that are explicitly stated in the policy. All risk policies have the benefit of providing you a wider range of coverage.

Another benefit of an all risk policy is that you know exactly what you're getting. Named peril policies can get murky when it comes to coverage, but with an all risk policy, you can expect to be covered for damages from all kins of perils unless your policy specifically states otherwise.

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Downsides of an all risk policy

There’s one main downside to all risk policies, however.

Because all risk policies are more comprehensive than other types of insurance policies, they also tend to be a bit more expensive. With insurance, you pay for what you get. if you want a more comprehensive plan that covers you in most situations, you can expect higher premiums to make up for the expanded coverage.

Can you adjust all risk policies?

Whether or not you can adjust your all risk policy depends on the homeowners insurance company that you’re working with.

Many insurance providers allow you to add or subtract exclusions from your all risk policy. Other companies have a set list of exclusions for any all risk policy. However, those companies will usually allow you to purchase a rider on the side to cover most of the excluded perils that you want.

Can you have just some entities covered in an all risk policy?

Yes. Most homeowners insurance companies will allow you to have an all risk policy for some entities, and a named perils policy for others. For instance, you can usually opt to have an all risk policy for home damage, but a named perils policy for personal property protection.

One of the keys to finding the right homeowners insurance policy for you is to know what the terms are. An all risk policy may or may not be right for your needs, but it is a great type of coverage to have.

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