Understanding Basic Form, Broad Form Coverage and Special Form Coverage

When comparing insurance policies for your apartment building, make sure you understand the differences between Basic Form coverage, Broad Form coverage, and Special Form coverage. The first two might save you money in the short term. However, no one wants surprises when filing a claim.

This article explains how each type of coverage works, so you can decide which is right for your property. (Spoiler alert: Our policies only include one of the three, for reasons explained below.)

What is Basic Form Coverage?

This type of policy only covers perils that are specifically listed. Like the name implies, Basic Form coverage offers the least amount of protection. Naturally, this form tends to have the cheapest premiums. Most policies cover the following:

• Aircraft or vehicle
• Explosion
• Fire
• Hail
• Lightning
• Riot or civil commotion
• Sinkhole collapse
• Smoke
• Sprinkler leakage
• Vandalism
• Volcanic activity
• Windstorm

Building owners should be cautious about purchasing Basic Form coverage because many perils aren’t named. If the weight of ice, snow or sleet damages a building, which isn’t unusual in the Northeast, the claim will be denied. The same goes for a burglary or break-in.

Bottom line: If it’s not named in the policy, then it’s not covered.

What is Broad Form Coverage?

Broad Form policies provide more extensive protection than Basic Form. This coverage includes all the named perils in Basic Form, plus additional ones, such as:

• Burglary/Break-in
• Collapse
• Falling objects
• Water damage
• Weight of ice, snow or sleet

As with Basic Form coverage, the insurance industry terms this a named-perils policy. If the peril isn’t named, it isn’t covered. Also, as with Basic Form coverage, the named perils are strictly defined in the policy.

What is Special Form Coverage?

These policy types offer the greatest protection. Unlike Basic and Broad Form Coverage, Special Form policies cover all perils except for those that are specifically excluded. Typical perils not covered by this type of policy include

• Earthquake
• Flood
• Intentional acts
• Neglect
• Nuclear hazard
• Ordinance or law
• Power failure
• War and terrorism

Many of these protections can be added as options, something we frequently do. (In case you were curious, all of our policies include Special Form coverage—along with extra protections—often for less than clients were previously paying.)

Comparing Basic, Broad and Special Form Coverage

POLICY	COVERAGE	IDEAL FOR
Basic Form	Covers listed perils only; limited protection	Budget-conscious property owners
Broad Form	Covers more named perils than Basic Form	Owners needing moderate protection
Special Form	Covers all risks except those explicitly excluded	Owners seeking maximum protection, flexibility and peace of mind

Choosing the Right Insurance Coverage for Your Property

The right insurance coverage depends upon the value of the property, your risk tolerance, your budget, and how deep your pockets are. Can you afford a significant loss if you choose a policy that offers less coverage?

Stu Cohen, founder of the City Building Owners Insurance program, is an experienced, independent insurance broker with an extensive understanding of policy coverage and details from many carriers. He and his team can evaluate your property and offer expert, unbiased advice to help you choose the best insurance options for your unique needs.

For more information about shopping for commercial property insurance, download our free Residential Building Insurance planner. Or, to discuss your specific needs, call our office at 877-576-5200 for a free, no-obligation quote.