Do You Need an All-Risk Insurance Policy?

An all-risk insurance contract, also known as an "open perils policy," covers and protects you against all risks or perils that could cause damage to your home, contents, or personal property. Any exceptions must be explicitly stated in the policy. It is distinct from a standard H0-3 homeowners policy in that the H0-3 policy only covers named perils on contents. All-risk insurance, also known as "open perils" or "comprehensive form" insurance, covers all risks on both personal and real property. An example of an open-perils, all-risk comprehensive insurance policy is HO-5.

A named perils policy only covers the risks specified on the policy. Meanwhile, a combination policy provides all-risk coverage for your home but only covers the named perils on your belongings.

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

Assume a friend comes over to assist you in installing a TV in your den. They drop the television, causing damage to both the television and the floor. Because the damage was unexpected and unintentional, an all-risk policy would cover it. A named perils policy, on the other hand, would not cover the damage to the floor or the TV because it only covers fire, smoke damage, lightning, and frozen pipes.

H0-3 broad form or named peril policies are more expensive than all-risk policies. Prices can vary significantly depending on your personal information, what is insured, where you live, and a variety of other factors. Shop around for specific quotes from insurance providers.

  • If you have coverage for all risks, you will be covered if you need to make a claim due to sudden or accidental damage, unless the insurance company can prove the damage was caused by something that is excluded or limited.

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

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

The HO-3, on the other hand, only covers named perils on contents. This means that if you choose a form that does not cover all risks on personal property, your coverage will be limited. Before you choose your home insurance, consider how you would feel if something happened to your home and belongings and you discovered you were not insured for all risks. If cost is an issue, consider raising your deductible to save money on your premium.

What's Left out of All-Risk Coverage?

As a value-added perk, an insurance company may choose to include more coverage in its all-risk policy by limiting exclusions. High-value home insurers, for example, frequently do this. However, some common items and risks are generally excluded from coverage:

  • Damage caused by rodents or pests
  • Sewer backups are one type of water damage.
  • Earth tremors
  • Flood
  • Nuclear disasters
  • Terrorist acts
  • Fragile item breakage
  • Mechanical failure
  • Pollution
  • Wear and tear
  • Defects that are hidden or latent
  • Damage that occurs gradually

The Insurance Information Institute reports that 5.13% of insured homes had claims in 2019, the most recent year for which data is available.

Although you may not file a claim this year, it is critical to review your coverage each year so that there are no surprises when you do file a claim.