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Broad form insurance is a type of coverage that provides more loss protection than a standard or limited insurance policy.
More coverage typically means higher premiums, so understanding your coverage options can help ensure you’re only paying for the coverage you need. This guide explains the different types of broad form insurance, what’s covered and when to consider buying a broad form insurance policy.
What a broad form policy covers depends on the type of insurance, state laws and insurance company. Broad form coverage can apply to policies like auto insurance, home insurance and business insurance.
Most people are familiar with and purchase standard auto insurance coverage that meets their state’s minimum requirements. You can choose to carry liability only, which provides coverage for bodily injury or property damage you cause to others in an accident, but offers no coverage for your vehicle.
Or you can buy full coverage, which includes liability insurance, comprehensive and collision coverages. Comprehensive and collision coverages provide physical damage protection for your car, regardless of who is at fault.
If you want coverage for your injuries, you may also include medical payments or personal injury protection (PIP) coverage. Although these coverages are optional in most states, PIP is a required coverage in New Jersey.
A broad form auto insurance policy can take on different meanings in different states. Michigan, for example, offers several collision coverage levels. The coverage you choose determines if your insurance company will pay under collision coverage and if you’re responsible for the deductible.
The type of policy you have determines the kinds of perils your homeowners insurance policy covers. Property insurance will cover losses under a “named peril” or an “open peril” basis.
A named-peril policy will only cover claims for losses that are included in the policy. Any other loss type is excluded from coverage. An open peril policy, or all-risk policy, covers all claim types except those expressly excluded in the policy.
Open peril coverage is usually more expensive than named peril coverage. Depending on your policy, you could have different peril types for separate coverages. For example, your dwelling may be covered on an open peril basis, but your belongings are covered on a named peril basis.
Broad form insurance coverage under a business policy can take on many forms. Under a business auto policy, for instance, you can narrow or broaden the scope of coverage to your specific needs.
If you want to save money, a basic auto insurance policy may only cover cars the business owns and a single driver or drivers listed on the policy. A broad policy could include all the owned vehicles plus any others you may rent or lease as part of the business. This broader coverage may also cover an owner or employee who drives their personal vehicle for business.
Business owners with commercial general liability insurance can include broad-form contractual liability coverage in the policy. This endorsement enhances the policy coverage to have specific coverage like:
Broad form insurance covers losses under a named peril basis, which means only the claimable events listed in the policy are covered. Losses that a broad-form insurance policy doesn’t cover include:
Coverage can vary by policy type, insurance company and state. If you’re not sure what’s covered and what’s not, speak with your insurance agent. They can also discuss any available coverage options to customize your policy to fit your unique needs.
Homeowners insurance comes in several forms, and the form type determines which perils are covered.
Basic form insurance is the least expensive because it only covers 10 perils. The basic home insurance covers the following on a named perils basis:
Broad form insurance also covers claims on a named peril basis but includes more loss types than a basic form policy. These additional claimable events include:
Special form insurance is the most expensive, as it covers claims on an open peril basis. This all-risk policy includes all listed perils plus other losses not explicitly excluded from coverage, like earthquakes and floods.
Broad form insurance is a good option if you want the added protection and are willing to pay the extra cost. It’s important to understand what broad-form insurance is, the insurance company’s options, and what broader coverage will provide.
Sometimes, like with homeowners insurance, special form insurance is better than broad form insurance. Working with your insurance agent to determine your coverage needs and how broad form insurance can better protect you, your family members, your business, or your employees can ensure you have the right coverage in place if a claim occurs.
In some states, broad form car insurance policies are more basic than a liability-only policy. It only covers the named individual on a personal auto policy. In contrast, a liability-only policy will cover anyone you give permission to drive your car. This basic form policy covers injuries or property damage you cause to another driver and their passengers. There is no coverage for your personal vehicle.
In Michigan, there is a difference between broad and basic collision insurance. If you choose broad collision coverage, you only have to pay a collision deductible if you’re found to be more than 50% at fault in the accident. Basic, or limited collision coverage, means your insurance company will only pay for your vehicle damage if you are 50% or less at fault, and you still have to pay your deductible.
The HO-2 is the broad form of homeowners insurance. This policy type covers the dwelling structure at replacement cost and your belongings at actual cash value (ACV). It also provides coverage against 16 named perils, like fire, lightning, wind, hail, smoke, theft and vandalism.
The broad form HO-2 homeowners insurance policy includes replacement cost on the dwelling. This means your policy will pay to repair or replace the damage to your home with new materials without factoring in depreciation.
This story was written by NJ Personal Finance, a partner of NJ.com. The information presented here is created independently from the NJ.com editorial staff, and purchases made through links in this article may result in NJ.com earning a commission.
