When choosing property insurance, the terms named perils and all risk can be confusing. Both offer protection for your home or rental property, but they do it in different ways. The key difference is how they define what is covered by these insurances.
Named perils insurance protects you from specific events listed in the policy, while all risk insurance covers everything except what is excluded. Understanding how these two work can help you avoid surprises when filing a claim and choose the coverage that fits your needs.
Understanding Named Perils Insurance
A named perils policy covers only the risks that are clearly listed in the contract. If a peril, or cause of loss, is not named, it is not covered.
Common named perils include:
- Fire and smoke
- Theft and vandalism
- Lightning and explosions
- Windstorms and hail
- Damage from vehicles or aircraft
Under this type of policy, the burden of proof is on the policyholder. That means you must show that your loss resulted from one of the perils listed. For example, if your property suffers water damage, you would need to prove it came from a covered peril like a burst pipe, not from gradual leakage, which is usually excluded.
Named perils coverage can be a practical choice for landlords, homeowners, or businesses looking for affordable protection, especially if they know which risks are most likely in their area.
What Does All Risk or Open Perils Insurance Mean?
An all risk or open perils policy works the opposite way. Instead of listing covered events, it covers all causes of loss except those specifically excluded in the policy.
This broader protection shifts the burden of proof to the insurer. You do not need to show that the loss was caused by a named peril. Instead, the insurer must prove that the cause is excluded.
Typical exclusions include:
- Earthquakes
- Flooding
- War or nuclear damage
- Wear and tear
- Mold or infestation
For example, if a heavy rainstorm causes water damage and your policy does not specifically exclude it, the claim is likely covered under an all risk policy. Because of this broad protection, all risk insurance usually costs more but offers greater peace of mind.
Key Differences Between Named Perils and All Risk Policies
Advantages and Disadvantages of Each Policy Type
Each type of policy has benefits and trade-offs depending on your budget, property type, and risk tolerance.
Advantages of Named Perils Policies
- Lower premiums
- Simple and easy to understand
- Good for low-risk areas or smaller properties
Disadvantages of Named Perils Policies
- Coverage gaps for unlisted events
- More effort needed to prove a claim
- May leave you exposed to unexpected losses
Advantages of All Risk Policies
- Broader protection with fewer gaps
- Easier claims process for most losses
- Offers strong coverage for landlords and commercial property owners
Disadvantages of All Risk Policies
- Higher premiums
- Exclusions still apply and need review
- Can be more complex to compare between insurers
When deciding between the two, balance what you can afford with how much financial risk you are comfortable taking.
When Should You Choose Named Perils vs. All Risk Coverage?
The best policy for you depends on several factors, including property type, location, and lender requirements.
You may choose named perils insurance if:
- Your property is in a low-risk area
- You need basic protection at a lower cost
- You are confident you know which risks are most likely
You may choose all risk insurance if:
- You own multiple or high-value properties
- Your lender requires broad coverage
- You want protection from unexpected events or liability claims
Tip: Some insurers allow you to upgrade a named perils policy by adding endorsements or riders to cover specific risks, such as flood or earthquake damage.
Common Misconceptions About All Risk Policies
Many people assume that “all risk” means “everything is covered,” but that is not true. Exclusions are still part of the contract, and they vary between insurers.
Common exclusions include:
- Damage from gradual wear and tear
- Mechanical breakdowns
- Intentional damage
- Mold, fungus, or pest infestations
Always read the exclusions section carefully. Even a broad policy has limits, and knowing what is not covered helps prevent disputes later.
How to Compare Policy Options Effectively
Before buying any policy, take time to review the details. The cheapest plan is not always the best value.
Here are steps to make a sound comparison:
- Read the declarations page and identify what is included.
- Check the exclusions and optional add-ons.
- Ask how claims are defined and handled.
- Confirm if coverage extends to temporary or vacant properties.
- Consult a licensed insurance professional if anything is unclear.
If you own rental properties, ensure that your insurance aligns with your lease agreements and local regulations. Some states or lenders may have specific requirements for coverage types or limits.
Protecting Your Property With the Right Coverage
Both named perils and all risk policies have a place in protecting your property. Named perils coverage works well for cost-conscious property owners, while all risk insurance offers broader protection for those who want peace of mind.
The right choice depends on your property’s value, location, and exposure to risk. Taking time to compare options can prevent serious financial loss later.
Get Peace of Mind With Obie Landlord Insurance
If you own rental property, it pays to understand exactly what your insurance covers. Obie Landlord Insurance makes this process easier. With quick online quotes, flexible policy options, and coverage designed specifically for landlords, you can protect your investment without the stress.
Obie offers both named perils and all risk policies, so you can choose the level of protection that fits your property and your budget. Start by reviewing your current coverage, then get a no-obligation quote with Obie today to see how much you can save while keeping your property secure.
FAQs about Named Perils vs All Risk Policies
What are examples of named perils in insurance?
Common examples include fire, theft, vandalism, lightning, explosion, and wind damage. Each insurer lists the perils covered, so always review your policy document to confirm which events apply.
Is all risk insurance worth the higher premium?
Yes, for many property owners it is. All risk insurance provides broad coverage that reduces the chance of denied claims and helps protect against unexpected losses.
Can I switch from named perils to all risk coverage later?
Yes. Most insurers allow you to upgrade your policy at renewal. Review your property’s risk profile first to decide whether the extra premium is justified.
What exclusions are common in all risk policies?
Typical exclusions include earthquake, flood, war, wear and tear, and mold. You can often add separate riders for excluded risks if they are relevant to your location.
Do landlords need both types of coverage?
Not at the same time, but landlords should always ensure their policy type matches their needs. Some prefer all risk coverage for broad protection, while others use named perils to control costs and add endorsements for specific risks.
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