Basic, Broad & Special Insurance

What’s the Difference Between Basic, Broad, and Special Form Insurance Coverages

When you’re shopping for the best value for your personal or commercial insurance requirements, you may notice that some insurance coverages specify “basic” coverage, while others may offer “special” or “broad” coverage. The differences are significant and when trying to make an apples-to-apples comparison, you want to carefully consider your risks and the price.

Starting with the Basic Form of insurance coverage, a policy that offers basic peril coverage is ONLY going to cover the insured for named perils. That means, if an event that isn’t actually named in policy happens, there’s no coverage. You’re on your own for any losses that aren’t specifically named. The named perils covered in the Basic Form include the following:

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

As probably anticipated, the Broad Form is more encompassing than the Basic Form coverage. The Broad Form is built to cover everything the Basic Form, and the most common perils expected. In the Broad Form insurance policy, you will also see the following coverages:

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

The most expansive form of insurance coverage is Special Form. In policies that use the special form type of coverage, instead of the perils covered being listed, the EXCLUSIONS are listed. In other words, unless the policy states a peril isn’t included, it’s included and your potential loss is covered. Usually, but not always, the special form is the one you want to buy. This is especially so if you’re not prepared to examine all the possible perils that may happen to your assets and evaluate the potential that they may happen in relation to the cost of coverage and your budget. Because it is more comprehensive coverage, many companies will require that your property has certain updates. Companies look for things like when the roof was replaced and when the plumbing, electric and HVAC systems were last updated.

Not everything is included in the Special form though. Depending on your location and type of risk, the exclusions may be highly material to you. For example, flooding is a common exclusion. That may not matter if you don’t face a flood risk, but for many, it’s the most important coverage you want. Common exclusions may include:

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

In 1968, an earthquake that was felt in 23 states and damaged property in Chicago and it’s estimated that a chance of a magnitude of 6 or higher has a 90% likelihood of happening before 2055. The point being, that just because you think a risk is unlikely, doesn’t make it so. It’s very dangerous to simply assume based on personal experience that a risk isn’t possible.

Flood insurance is another type of coverage that many dismiss without careful consideration. Most people wrongly believe they don’t live or work within a flood zone. Because of updates in our ability to understand flood risk, locations are no longer considered within or outside of a flood zone. Any given location is rated based on its risk of flooding. That’s a good thing because over 20% of property that becomes flooded wasn’t considered within a flood zone previously.

What’s the bottom line? You can be sure that by working with an agent at the Davis Insurance Group, you’ll have the expert advice you need to make a decision on the type of coverage you should have. If you make the mistake of buying insurance based on cost instead of coverage, you’re likely to wish you didn’t, and at the worst possible time.