"All risks" refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For example, if an "all risk" homeowner's policy does not expressly exclude flood coverage, then the house will be covered in the event of flood damage.
This type of policy is found only in the property-casualty market.
Insurance providers generally offer two types of property coverage for homeowners and businesses—named perils and "all risks." A named perils insurance contract only covers the perils stipulated explicitly in the policy.
For example, an insurance contract might specify that any home loss caused by fire or vandalism will be covered. Therefore, an insured who experiences a loss or damage caused by a flood cannot file a claim to his or her insurance provider, as a flood is not named as a peril under the insurance coverage. Under a named perils policy, the burden of proof is on the insured.
An all risks insurance contract covers the insured from all perils, except the ones specifically excluded from the list. Contrary to a named perils contract, an all risks policy does not name the risks covered, but instead, names the risks not covered. In so doing, any peril not named in the exclusions list is automatically covered.
The most common types of perils excluded from "all risks" include earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, nuclear hazard, and market loss. An individual or business who requires coverage for any excluded event under "all risks" may have the option to pay an additional premium, known as a rider or floater, to have the peril included in the contract.
The trigger for coverage under an "all risks" policy is physical loss or damage to property. An insured must prove physical damage or loss has occurred before the burden of proof shifts to the insurer, who then has to prove that an exclusion applies to the coverage.
For example, a small business that experienced a power outage may file a claim citing physical loss. The insurance company, on the other hand, might reject the claim stating that the company experienced a loss of income from a mere loss of property use, which is not the same thing as a physical loss of property.