Overview and key points
You’re always advised to read the small print – but what if the small print doesn’t make sense to you? Insurance terminology can often be confusing and if your insurance adviser hasn’t explained it all to you, a misunderstanding can be costly.
There is a significant difference between having insurance cover arranged on an all-risks versus named perils basis.
Here we explain what this means and why understanding the difference matters.
Insurance is about protecting you and your business against risks and policy wordings often refer to perils. A peril is a specific risk or event that can cause loss or damage to an insured property, for example fire, flood, storm, theft, malicious damage, accidental damage and escape of water.
If your insurance is provided on a named perils basis, that means that it will only provide cover for losses arising from the perils specifically listed in the policy wording. This means that in order for a claim to be accepted by the insurer, you would need to prove that the loss was due to a named peril.
In contrast, insurance arranged on an all-risks basis will provide cover for losses arising from everything not specifically excluded. Importantly, in the event of a claim, this shifts the burden of proof to the insurer to prove an exclusion is in place for the cause of the incident or accident:
With a named perils insurance policy:
- Cover is provided for explicitly listed perils only
- The insured must prove the loss resulted from a named peril
An all-risks policy:
- Provides cover for everything not explicitly excluded
- The insurer must prove an exclusion applies to deny a claim
Put simply, an insurance policy written on all risks basis provides greater cover than an equivalent written on a named perils basis.
Here’s a fictional example of a common insurance claim – flooding – and why this might not be covered under a named perils policy.
UpAndOver indoor climbing centre has insurance in place on a named perils policy. The cover was cost effective and with time pressures, the owner didn’t check the finer details with his broker. The alternative of an all-risks policy wasn’t discussed or explained and the owner of UpAndOver felt confident that the listed perils – fire, theft, windstorm, hail, lightning, explosion, vandalism, malicious damage) provided the cover he believed the business needed.Although flood cover was not a named peril, the location of the climbing wall was nowhere near a river and not in an area prone to flooding.
However, after a storm hit several parts of the UK with a prolonged period of heavy rain, the car park was underwater with the drains unable to cope and water entered the climbing centre causing damage to the flooring, walls, mats and equipment.
The business owner submitted an insurance claim for the damage, but this was denied by insurance company as flood was not an insured peril. Although the policy provided cover for damage caused by accidental discharge or overflow of water or steam (often referring to burst pipes or leaks), it did not include damage caused by natural floods from external sources such as overflowing rivers, surface water runoff or ingress of water.
This fictitious scenario highlights the vital difference: if a peril isn’t on the list, it’s not covered by a named perils policy, whereas with an all-risk policy this scenario would be covered unless specifically excluded in the policy wording or by endorsement.
Not all providers offer all risks cover. We’re here to help you understand the cover you have and the risks your business is exposed to. For a no-obligation review of your current insurance arrangements, speak to our team of climbing wall insurance experts today.
*The Partners& insurance solution for climbing walls is written on an all-risks basis.
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