If insurance definitions make you a little anxious, learning the basics is a must. Let’s start with two home insurance terms that can have the biggest impact on the type of coverage your homeowners policy provides: broad form and comprehensive.
One regular pepperoni pizza, please!
Broad form home insurance is like ordering a regular pepperoni pizza. You know what you’re paying for – just one topping, with cheese and sauce. Broad coverage is a good, basic policy that covers loss or damage due to a set list of causes.
But if you’re concerned that the list is missing items, just like pizza toppings, you can add your own. In insurance, these added toppings can have a bunch of different names — endorsements, floaters, and riders. Whatever they’re called, they all mean the same thing: you’re telling the insurance company to add specific coverage to your homeowners’ policy (and then pay a higher premium to cover the addition). The key to this set up is that the onus is on you, the policyholder, to make this request.
The list of causes for damage is pretty standard across the industry (but do check with your broker and read your policy to clarify yours). Under a broad form policy, if the damage to your home is caused by something other than these 15 things, the damage will not be covered by insurance. Also, you need to check your policy for the definition of those 15 causes of loss because the insurance company can limit or exclude how the insurance applies. A standard list might include:
- Fire or lightning
- Falling objects
- Impact by aircraft, spacecraft, or land vehicle
- Vandalism or malicious acts
- Sudden and accidental water escape or rupture
- Windstorm or hail
- Theft including damage caused by attempted theft
- Fuel leakage
- Collapse of a building or any part of a building
- Damage caused by bears
But I wanted “the works”!
By contrast, comprehensive form home insurance (sometimes called “all risk” insurance) is like ordering a pizza with the works. It’s fully loaded with everything you can imagine. But if the insurance company would like to exclude a topping (maybe they’ve chosen to not insure anchovies), the onus is on the company to specifically inform you in writing of the exclusion. There are lots of common exclusions out there, so pay attention to what your insurance company and your specific policy have flagged. Some examples might include losses caused by:
- Government action
- Nuclear hazard
- War and military action
Get the most bang for your pizza bucks
At the end of the day, home insurance policies — like pizza toppings — are all about personal preference. You’ll need to assess what valuables need to be covered (just like what toppings you value) and weigh the benefits of coverage with the costs. On average, broad form home insurance premiums are about 10% cheaper than comprehensive premiums. And if you choose to add more endorsements to be covered, the price will be higher. Comprehensive form insurance might cost a bit more, but in the event of a loss, you might be happy you paid the extra costs.
If you’re still having trouble deciding on your coverage (or pizza toppings, for that matter!), an insurance broker can give you all the information you need to make a sound decision — at no cost to you.