Commercial All Risk or Named Perils? Neither Alone Will Be Enough

Written by on 2018-01-23 7:53 AM . It has 0 Comments.

As a business owner you can get very busy dealing with customers, employees, taxes and more. Sometimes this means you must prioritize your time and effort. One thing you should make sure you understand is the type of insurance coverage your company has and whether it’s the right coverage for your needs.

Let’s look at what the difference is between Named Perils and All Risk policies and examine why neither of these policies on their own is enough for today’s businesses.

What is a Named Perils Business Insurance Policy?

This is a more limited coverage policy. Very simply, a Named Perils policy lists what is specifically covered. Or, what the insurance company will pay for if damaged results from a peril listed in the policy. Anything not listed is excluded and will be denied in the event of a claim.

For example, a named perils commercial property policy can include the following: fire or lightning, windstorm or hail, explosion, falling object, riot or civil commotion, aircraft, vehicles, smoke, vandalism, water damage from a burst pipe, and window breakage.

If damage to the business property or building is caused by one of these reasons it will likely be covered. If the damage is caused by something else, like flooding, or earthquake or anything not specifically listed in the Named Perils policy then the claim will not be covered.

Because of this limited version of coverage a Named Perils policy is generally cheaper than the All Risk policy.

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What is an All Risk Business Insurance Policy?

An All Risk Policy, or commonly known as a Broad Form policy, is a more expanded policy. It covers everything except what is specifically excluded.

An All Risk policy is superior to the named perils because it can cover situations and perils that you couldn’t have foreseen.

Special Coverages Not Covered Under an All Risk or Named Perils Policies

Increasingly, as businesses diversify so to do the risks. Many times an insurance product is designed to protect against a new or developing problem. For example, on the personal homeower’s insurance side of things Flood Insurance was introduced to help homeowners deal with the increasing risk of flooding.

In the commercial world one of the most important coverages that has come along is Cyber Liability, or policies that protect a business from the damages of a cyber attack or hack. We have developed an introductory program for cyber risk and have cyber risk insurance programs for larger, more complex companies.

At the End of the Day Understand Your Business Risk and How to Protect It

There are many coverages that can be added that are not covered under a plain Named Perils or All Risk policy. Some examples that need to be added separately are bylaws, employee dishonesty, pollution, mechanical breakdown, cyber liability and many others that deal with specific kinds of risks.

Ultimately, knowing what liabilities exist for your business means you know what options, coverages, and insurance protections you need to purchase. Frequently, an All Risk policy will NOT be enough. Many of the excluded items above can be purchased as add-ons.

The question is, do these add-ons make sense for you and your company? A conversation with an Lackner McLennan / Erb and Erb commercial broker will help shed light on your needs.

Want a second opinion on your commercial insurance? Visit here.

We’d love to read your comments below. 

Thanks for reading.

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