You know you need insurance for your home or office building, but did you know there are many different options? You can choose between a broad form and a comprehensive, or special form, policy type for your building. One is more expensive than the other, and coverage is different; however, you can decide if the extra protection is worth the extra cost.
Broad Form Definitions
In the insurance industry, the term "broad form" can mean different things. Generally, it refers to a policy that offers a broader range of coverage versus a corresponding basic form policy, but the specifics can very by policy type.
Some states, like Michigan, have different types of collision coverage for automobiles. Broad collision eliminates your need to pay a deductible in certain circumstances. Businesses often purchase broad form comprehensive general liability policies to protect themselves against legal expenses and other liabilities, and in this context, broad form and comprehensive insurance have the same meaning. For buildings, broad form and comprehensive form refer to the number of perils -- deemed by the specific carrier -- a policy covers.
Broad Form Dwelling and Contents
Basic form property insurance covers a bare minimum of perils such as fire and burglary. Basic form homeowner's insurance is not widely available, as of 2011.
Broad form policies expand the list of perils the policy protects against, to include things like smoke, falling objects, riot, vandalism and windstorms or hail. Your home's contents are insured against this broad list of perils, so it is your responsibility to prove to the insurer that the damage was caused by something on the list when you file a claim. The dwelling is covered against these same losses. In Canada, broad form policies expand the dwelling coverage to include all risks except those specifically excluded by the policy.
Special Form Definition and Coverage
Because of the potential for confusion with an auto insurance policy's comprehensive coverage, property insurance written with a comprehensive list of protection is commonly called "special form" in the United States. Special form coverage protects both the dwelling and contents of a building against all forms of damage, unless the policy specifically excludes the cause of loss. This puts the burden on the insurer to prove that the damage was caused by an excluded cause of loss if it wants to deny the claim. A common exclusion on special form policies is nuclear war.
Cost of Special Form
Special form is the broadest type of property insurance available. You do not need to consult your policy's list of covered losses to determine whether or not to file a claim if you have a special form policy. Because of this added protection, and because the insurer has the burden of proof rather than you, special form policies cost more than broad form policies. The actual cost difference varies by insurer, but the difference can be 10 percent or more, according to Harmony Insurance, an agency based in Alberta, Canada.