The Important Differences between Basic, Broad and Special Form Coverage

When you purchase homeowner’s, commercial property or renter’s insurance, you typically have a choice of three different levels of coverage: Basic, Broad and Special. The difference between these coverage forms isn’t well understood by many property owners and confusion on this topic can lead to large or unexpected gaps in coverage. In this blog post, we’ll explain how to read Basic, Broad and Special Form coverage options and talk a little about what makes each one unique. Our hope is that, by providing this information, we can help you make decisions about which of these coverage options is the best fit for your home or business.

Basic Form

Basic Form, as its name suggests, is the least comprehensive of the three coverage options. The important thing to note about reading Basic Form policies is that they cover only named perils. This means that if a coverage is not specifically named in the policy, there is no coverage. If something happens to your home or business that’s not on the list, you’re not covered.  A Basic Form policy tends to be quite limited in scope and should be used with care.

Coverages included in a typical Basic Form policy are:

•  Fire
•  Lightning
•  Windstorm or Hail
•  Explosion
•  Smoke
•  Vandalism
•  Aircraft or Vehicle Collision
•  Riot or Civil Commotion
•  Sinkhole Collapse
•  Volcanic Activity

Broad Form

Broad Form coverage is more expansive than Basic Form coverage. It includes coverage for all the hazards included in a Basic Form policy plus several additional hazards which are expressly named. Like with a Basic Form policy, a Broad form policy covers only named perils. Again, if a coverage is not specifically named in the policy, that coverage is excluded. Fortunately, the Broad Form is designed to cover the most common forms of property damage.

Coverages included in a typical Broad Form policy (in addition to what’s covered by the Basic Form) are:

•  Burglary/Break-in damage
•  Falling Objects (like tree limbs)
•  Weight of Ice and Snow
•  Freezing of Plumbing
•  Accidental Water Damage
•  Artificially Generated Electricity

Special Form

Special Form coverage is the most inclusive of the three options. The trick with Special Form policies is that they should be read differently from how you would read a Basic or Broad Form policy. In a Special Form policy, instead of the document listing what’s covered, all perils are covered except for the exclusions specifically enumerated in the policy. In this sense, reading a Special Form policy is kind of like the opposite of reading a Basic or Broad Form policy. All unlisted perils are covered perils. This can be extremely beneficial to the insured since Special Form coverage makes allowances for the kinds of screwball hazards one might never expect. However, if something happens to your home or business, and it is on the list, the policy will provide no coverage.

Everything is typically covered under a Special Form policy, except for these common exclusions:

•  Ordinance of Law
•  Earthquake
•  Flood
•  Power Failure
•  Neglect
•  War
•  Nuclear Hazard
•  Intentional Acts

The big takeaway here is that you should carefully read the TYPE of policy form you have and carefully review the listed (or excluded) perils.  In any property policy, make sure you understand which risks are covered and which are excluded. You don’t want to find out too late that your home or business isn’t covered against a suffered loss. The language in Basic, Broad and Special Form coverage options can be particularly confusing. When making these types of decisions, we’d encourage you to speak to an independent insurance agent or contact a carrier directly in order to ensure you’re pursuing the best product for your business. You can find more information on Basic, Broad and Special Form coverage options on IRMI’s online index of insurance terms.

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