What Is Industrial All Risk Insurance? A Plain-English Guide

Larger manufacturers often get quoted "Industrial All Risk" alongside standard fire insurance, without a clear explanation of what the difference actually is or why it might cost more. Here's the plain-English version.

The Short Answer

Industrial All Risk (IAR) is a broader, combined policy that bundles property damage cover (similar to fire insurance) together with machinery breakdown cover, and often business interruption cover, into a single policy — rather than buying each as a separate standalone policy from potentially different insurers.

Why Not Just Buy Fire Insurance?

Standard fire insurance covers fire and named allied perils to your building, machinery, and stock. It does not cover mechanical or electrical breakdown of machinery that isn't caused by fire — a motor burning out, a boiler failing, a compressor breaking down. For a manufacturer where equipment breakdown is a genuine, recurring operational risk, this gap matters. IAR closes it by combining both types of cover under one policy.

What's Typically Bundled In

• Fire and allied perils cover for buildings, machinery, and stock
• Machinery breakdown cover for mechanical and electrical failure
• Business interruption / loss of profit cover following an insured event
• Sometimes, additional named perils relevant to the specific industry

Is It More Expensive Than Separate Policies?

Not necessarily — and this is the part that surprises people. Because IAR is underwritten as a combined package rather than multiple separate policies, insurers sometimes price it more competitively than the sum of standalone fire, machinery breakdown, and business interruption policies bought individually. It's worth comparing both structures directly rather than assuming either is automatically cheaper.

Who Actually Needs This vs. Standard Fire Cover

Smaller operations with limited machinery dependency, or businesses where equipment failure would be a minor inconvenience rather than a major disruption, are often adequately served by standard fire insurance plus, if needed, a standalone machinery breakdown add-on. Larger manufacturing operations — where a single critical machine going down could halt an entire production line for weeks — are where IAR's combined structure and business interruption protection genuinely earn their premium.

The Business Interruption Component Matters Most

For many manufacturers, the physical repair cost of a fire or breakdown is manageable — it's the lost production and lost revenue while repairs happen that causes real financial damage. This is exactly what the business interruption component of IAR addresses, and it's often the single most valuable part of the policy, even though it gets the least attention during the sales conversation.

How to Decide

The right question isn't "fire insurance or IAR" as a philosophical choice — it's a genuine numbers exercise: what would a two-week production stoppage actually cost your specific business, and does your current cover address that, or only the physical asset damage? That calculation, done honestly, usually makes the answer clear.