All Risk vs Total Loss Only Property Insurance: Which is Better?
Property insurance is a type of insurance that provides protection against the risk of loss or damage to your property, such as a house, apartment, office, building, warehouse, etc. Property insurance can help you deal with financial losses due to natural disasters, fire, theft, vandalism or even terrorism.
However, not all property insurance provides the same protection. There are two types of property insurance that are commonly offered in the market, namely all risk property insurance and total loss only property insurance. What are the differences and benefits of each of these types of property insurance? Which is better for you to choose? The following is the explanation.
All Risk Property Insurance
All risk property insurance is a type of property insurance that provides protection against all risks of loss or damage to your property, except those explicitly excluded in the policy. In other words, all risk property insurance is inclusive, meaning that all risks are considered insured unless there is a written exception.
Some examples of risks that are usually excluded in all risk property insurance are:
- War, riot, strike or riot damage
- Damage from a nuclear or radiation disaster
- Damage due to construction or design errors
- Damage due to improper use or maintenance
- Damage caused by long-term weather effects, such as rust, mold or termites
- Damage due to environmental pollution
- Damage due to fraudulent or intentional acts by the insured or other parties
The advantage of all risk property insurance is that you don't need to worry about whether the risks affecting your property are included in the policy coverage or not. You can also add additional clauses to cover certain risks excluded in the policy, by paying an additional premium.
However, the weakness of all risk property insurance is that the premium you have to pay is usually higher than total loss only property insurance. Apart from that, you also have to pay close attention to the terms and conditions in the policy, because there are several things that can invalidate your claim, such as:
- Not reporting loss or damage within the allotted time
- Failure to take preventive or mitigating measures to reduce loss or damage
- Not providing sufficient or valid evidence to support your claim
- Failure to comply with other obligations specified in the policy
Total Loss Only Property Insurance
Total loss only property insurance is a type of property insurance that only provides protection against the risk of total loss or destruction of all your property due to certain risks mentioned in the policy. In other words, total loss only property insurance is exclusive, meaning that only certain risks are covered and the rest are not.
Some examples of risks that are usually covered in total loss only property insurance are:
- Fire
- Explosion
- Earthquake
- Flood
- Hurricane
- Tsunamis
The advantage of total loss only property insurance is that the premium you have to pay is usually lower than all risk property insurance. Apart from that, the claims process is also easier and faster because you only need to prove that your property suffered a total loss due to the risks covered.
However, the weakness of total loss only property insurance is that you will not get compensation if your property experiences partial loss or damage due to risks that are not covered. You also cannot add additional clauses to cover other risks that are not included in the policy.
Which one is better?
Choosing a better type of property insurance depends on your needs, preferences and abilities. If you want to get broader and more flexible protection, you can choose all risk property insurance. However, you must be prepared to pay higher premiums and meet stricter terms and conditions.
If you want to get protection that is simpler and cheaper, you can choose total loss only property insurance. However, you must be prepared to bear the risk of partial loss or damage that is not covered by the policy.
Before choosing the appropriate type of property insurance, it would be a good idea for you to compare the various property insurance products offered by various insurance companies. You can consider factors such as:
- Risk coverage
- Premium amount
- The sum insured
- Process claims
- Insurance company reputation
Thus, you can find property insurance that best suits your needs and conditions.
