Choosing Between All Risk and Peril Specific Commercial Property Insurance

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Which one do you need to protect your business?

Protecting your business against known risks is easy when you consider the many different types of insurance coverage available today. There are business insurance policies that have been designed to ensure that every conceivable risk is covered—and then some. But for many business owners, it’s not so much knowing the options as it is choosing the appropriate one. To help you, we’ve created this guide that discusses the difference between two types of business coverage, all risk and peril specific commercial property insurance and how to decide which one you need.

Commercial property insurance, explained

Generally speaking, a commercial property insurance policy covers all aspects of your business’ building like the the building itself, signage, fencing, fixtures and your inventory. Whether you own the building or are just leasing, you’ll be covered in the event that a fire, theft, plumbing issues or vandalism causes damage to the property. Of course, it goes without saying that all businesses need a commercial property policy, but the next step is determining exactly what you need. Here’s where you need to understand the differences between an all-risk policy and a peril specific one. Let’s take a look:

Peril specific

A peril specific (or named peril) policy provides coverage only for those events that are listed in your policy. Some businesses use this type of policy when there are known risks in the area that the building is located—a flood zone, for example. While the policy will provide protection for the specific perils noted, it will not cover anything else, so if there’s a fire, a storm damages your sign outside or a pipe bursts and the water fries your computers, you’re out of luck. The other thing to keep in mind with this kind of policy is that it is up to you to prove that one of the named perils actually caused the loss.  The benefits of a peril specific policy are:
 
  • • It allows you to specify coverage for known risks like flood, wind, hail, riot
  • • It is usually less expensive than other policies

All risk

On the other side of the coin, an all risk policy will cover everything that is not excluded in your policy. So whether you’ve had damage caused from smoke from a fire, damage from a storm or vandals break your windows and destroy your front lobby, you’ll be covered. Unlike the peril specific policy, the burden of proof in this case lies on your insurance carrier.
All risk policies are generally pricier than peril specific, but that doesn’t necessarily mean you should choose this type over the other. It’s also important to keep in mind that many of the events not covered in an all-risk policy are those that a peril specific policy would be used for, including:

 

  • • Flood, mudslide, seepage and sewer backup
  • • Governmental seizure or destruction of property
  • • Boiler explosion
  • • Off-premises utility service interruption
  • • Building ordinance or law
  • • Seepage or leakage of water over a period of time
  • • Electrical damage to electrical devices
  • • Employee dishonesty
  • • Wear and tear; rust, corrosion, fungus, decay, deterioration
  • • Damage to building interiors by rain
  • • Mechanical breakdown
  • • Theft of building materials and supplies not yet attached to buildings
  • • Pollution

How to choose

While both policies may be desirable for your business property, the key here is to consider all the risks involved in where your business is. Remember that when you are purchasing business insurance of any kind, the cost of your premiums, while important, should not be the deciding factor because you stand to lose so much more if you are not covered. Here’s just a quick takeaway:

All risk:

  • • Usually more expensive, but offers more comprehensive coverage
  • • No burden of proof, less work when filing a claim

Specific peril:

  • • Will cost less, but will be limited to covering only those events named in the policy
  • • Requires you to prove that named peril caused the loss
  • • Usually covers natural disasters that all risk policies do not
For help choosing the commercial property insurance policy that best meets your business’s needs, contact Avante Insurance today.