All Risks vs Perils-Based Cover: What’s Right for Your Home?

Not all insurance policies are the same, and one difference is that some policies will be “Perils based” whilst others will be “All Risks” policies.

A “peril” is a risk to your home or contents, like fire, flood, storm or theft; the kind of things we all insure against. A Perils based policy will cover a specific list of perils, whilst an All Risks policy will cover all losses except those specifically excluded.

If you are looking for a cheaper policy you may end up with a ‘Perils based’ policy without realising, especially if you are using a comparison site. Perils based policies are generally more restrictive in cover, compared to ‘All Risks’ policies. Whilst they can be right for some people, understanding the difference can help you make an informed decision.

What is a Perils based policy?

Most standard policies are Perils based policies. These will only cover the specific perils shown in the policy wording. This means if it’s not listed as an insured peril then it is not covered; even if it’s not specifically noted as being excluded. On this basis, it would be easier for an insurer to decline a claim, as you would need to prove that the loss was caused by an insured peril for the claim to be paid.

Typically, the Contents cover under a Perils based policy will cover items within the home only. Cover for items out of the home will need to be added to the policy, under the optional ‘Personal Possessions’ cover. This will then be the limit you are covered for outside of your home at any one time, this includes clothing, bags, electronic devices, as well as jewellery and watches. If Personal Possessions cover isn’t added to your policy, then your contents cover will be limited to loss or damage within the home only.

Perils based policies also tend to have more optional covers, such as Accidental Damage, Legal Expenses and Home Emergency. Often these need to be voluntarily added to a policy at an additional cost, so make sure you understand what is and isn’t included.

Standard perils include, but are not limited to, fire, lightning, explosion, earthquake, storm, flood, weight of snow, escape of water, impact, theft or attempted theft and subsidence. The full list of insured perils will be shown in your policy wording, and some summarised on your Insurance Product Information Document (IPID).

What is an All Risks Policy?

An All Risks policy will cover all losses, except those specifically excluded. As a result, in the event of a claim, the insurer would need to prove a loss is excluded in order to decline the claim, but otherwise it should be covered. This usually streamlines the claims process.

These policies will still have the standard insurance exclusions that all home insurance policies have such as wear & tear, acts of terrorism/war, faulty workmanship etc, but otherwise the cover is generally much wider than a Perils based policy.

Most of the ‘All Risks’ policies we offer tend to give worldwide cover too. This means that contents, art, antiques and jewellery are covered both inside and outside of your home on a worldwide basis (high-risk countries excluded) as standard, unless your policy includes specific endorsements, such as a safe clause or floating limit. Unlike a Perils based policy, ‘Personal Possessions’ is not a section of cover in a All Risks policy wording, the cover is automatically provided under the contents section by being ‘worldwide’ cover.

Typically, All Risks policies will have less optional covers, such as Accidental Damage, Home Emergency and Legal Expenses as these will be included as standard. Worldwide All Risks policies also tend to have a number of benefits included within the policy wording, such as an Excess Waiver, Extended Replacement Cost and additional lifestyle cover such as travel or cyber cover.

As All Risks policies tend to provide more comprehensive cover, smoother claims services and more flexibility, we tend to recommend a worldwide All Risks based policy for our clients where possible. If you think you might benefit from an All Risks policy or worldwide cover, please speak to us and we’ll find a policy best suited to you and your lifestyle.