Against All Risks (AAR)

What Is Against All Risks (AAR)?

The term "against all risks", also known as all-risk insurance, refers to an insurance policy that provides coverage against all types of loss or damage. Exclusions can still be included in an against all risks policy, but the insured is covered against any risks that are not specifically named. 

Understanding Against All Risks (AAR)

Insurance protects people and companies against loss as a result of damage. There are various types of insurance and almost anything can be insured against loss including property. There are two different kinds of property insurance: Named perils — which we'll look at a little later — and against all risks. The latter is also referred to as open perils policies, all perils, or comprehensive insurance.

An against all risks policy is generally found in the property-casualty market and provides coverage against anything that can do damage to your home or personal property. That is, of course, unless the policy comes with any exclusions. This means the policy doesn't pay for damages if it explicitly names a specific peril. But if there is no specific exclusion written into the policy for something like hurricane-force winds, the policy automatically covers any and all damages sustained by these kinds of winds.

Some of the most common exclusions included in against all risks policies are floods, earthquakes, rodents and pests, pollution, damage as a result of mechanical breakdown, nuclear-related accidents, sewer damage, and normal wear and tear. There are some insurance companies, though, that limit the number of exclusions on all-risk policies, while others may charge more to cover certain perils.

Against all risks policies are usually more expensive than other policies. That's because they provide more comprehensive coverage than their counterparts.

Special Considerations

Each form of insurance provides protection against a different type of loss. They can also have different exclusions and different riders and deductibles, so it is important for a policyholder to verify what their policy covers. If a policyholder needs additional riders or coverages, the policyholder will need to negotiate those coverages with providers.

Common exclusions included in against all risks policies are floods, earthquakes, rodents and pests, pollution, damage as a result of mechanical breakdown, nuclear-related accidents, sewer damage, and normal wear and tear. 

Provisions under most policies stipulate that the property owner is responsible to prove damages before the insurance company assumes liability before paying out a claim. Once the insurer picks up the claim, it makes an assessment. During this time, the company must decide whether an exclusion applies, or whether it will advance the insured party a payout.

Against All Risks vs. Named Peril Policy

An against all risks insurance policy is the opposite of a named perils policy, which protects against specific losses named in the policy. An example of a named peril policy would be a flood insurance policy, which specifically insures against damages incurred by floodwaters.

Named perils policies are generally better for homeowners who live in certain areas. For example, a property owner may consider taking out this kind of policy to cover against damage from events like fire and theft, leaving off events like earthquakes and floods, as they may not be prone to these disasters. Doing so decreases premium costs, saving the homeowner money.