Definition:All-risk policy
🌐 All-risk policy is an insurance contract that covers every cause of loss except those specifically excluded in the policy language, rather than listing only named perils that are covered. The term is most commonly encountered in property insurance and inland marine insurance, where it represents the broadest standard form of coverage available. Despite its name, an all-risk policy does not literally cover every conceivable risk — it simply reverses the default: losses are covered unless the insurer can point to a specific exclusion in the contract.
⚙️ The mechanics hinge on the burden of proof. Under a named peril policy, the insured must demonstrate that the loss was caused by one of the perils explicitly listed. Under an all-risk policy, the insured need only prove that a covered loss occurred; the carrier then bears the burden of showing that an exclusion applies. Common exclusions in all-risk property forms include wear and tear, inherent vice, nuclear hazard, war, and — increasingly contested — certain flood and earthquake events. Underwriters price all-risk coverage at higher premiums than comparable named peril forms because the carrier assumes a wider range of potential loss scenarios and faces greater uncertainty about emerging or unforeseen causes of loss.
💡 Choosing between all-risk and named peril coverage is one of the most consequential decisions a commercial policyholder makes. Businesses with complex operations — manufacturers with supply-chain dependencies, technology firms with high-value equipment — generally favor all-risk policies because they cannot anticipate every peril that might disrupt their operations. From the carrier's perspective, writing all-risk business demands precise exclusion drafting and vigilant claims handling, since any ambiguity in an exclusion is typically construed against the insurer under the legal doctrine of contra proferentem. The interplay between all-risk insuring agreements and their exclusions generates a significant volume of coverage litigation, making clear, well-tested policy language a competitive differentiator for insurers operating in this space.
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