All-Risk Insurance

All-Risk Insurance is a broad-form property policy that covers loss or physical damage from any peril not specifically excluded in the policy wording, as opposed to a named-perils policy that only covers the specific causes of loss listed in the schedule.

What is All-Risk Insurance?

The practical value of an all-risk policy is that the insured does not need to prove which peril caused the loss; the insurer must pay unless it can point to a specific exclusion that applies. Typical exclusions in all-risk policies include wear and tear, inherent defect, deliberate acts by the insured, and loss of use (consequential loss). Nuclear, war, and cyber exclusions also appear in most standard wording, though specialist extensions can buy back some of these.

In procurement, the term "all-risk insurance" most commonly appears in the context of construction-all-risk insurance, which is the standard broad-coverage policy for physical damage to works under construction, and marine-cargo-insurance on an "all-risk" basis, which covers goods in transit against theft, mishandling, and transit-related damage. When bidding documents specify "all-risk" coverage without further qualification, the contractor should read it as requiring the broadest commercially available form appropriate to the asset being insured.

The insurance-requirements schedule in a contract will specify whether coverage must be on an all-risk basis or a named-perils basis. All-risk is the more expensive but more comprehensive form, and it is the standard requirement in development-bank-financed infrastructure contracts.

Why All-Risk Insurance matters for bidders

When a contract requires all-risk coverage, a bidder must price the premium for the broadest available policy form, not a cheaper named-perils policy. The cost difference is significant on large construction contracts in high-risk environments. A bidder should also check whether specialist endorsements are needed, such as extensions for contract works in areas prone to flooding or seismic activity, since standard all-risk policies may exclude catastrophe perils without a separately priced add-on. Clarifying the required policy form during the bidding period avoids post-award disputes about whether the insurance provided actually meets the contractual requirement.

FAQ

Is all-risk insurance the same as comprehensive insurance?

The terms are often used interchangeably in everyday language, but technically "all-risk" is a specific policy structure that covers all perils not excluded, whereas "comprehensive" is a marketing term with no standard legal meaning. Always read the actual policy wording.

What are the most common exclusions in an all-risk policy?

Standard exclusions include gradual deterioration, inherent vice, design defect (for the defective part itself, though resulting damage is usually covered), war, nuclear contamination, and intentional damage by the insured.

Can a contractor use a group all-risk policy for multiple projects?

Yes, large contractors often hold a master or annual all-risk policy covering all their projects, with specific projects declared to the insurer. The procuring entity will require a certificate of insurance confirming the project is covered under the policy.