Broad Form Insurance Definition, What It Covers, Example

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is Broad Form Insurance?

Broad form insurance coverage extends beyond the basics to include rare events that may be of serious risk to the insured. This type of insurance usually requires that a higher premium, and often a deductible, be paid. Broad form insurance can be applied to nearly all forms of insurance, including investments, assets, etc.

Key Takeaways

• Broad form insurance expands basic insurance to cover less common hazards and risks that can nonetheless result in significant losses.
• Broad form coverage may be included in a standard policy offering, or available as a rider to a standard policy.
• As a result, broad form insurance carries higher premiums and deductibles than standard policies.

Understanding Broad Form Insurance

Broad form insurance extends beyond basic coverage. One example of broad form insurance coverage is automotive glass insurance. A customer may need glass insurance because they're frequently on roadways that cause damage to windshields. Glass insurance is not offered under basic automotive insurance plans and therefore must be specifically requested, and a premium must be paid.

The definition of the term "broad form insurance" can vary, depending on the type of insurance. With most insurance policies, a policy is usually basic or broad form. For example, for business insurance, there is usually:

• A basic form policy that typically covers fire, explosions, storms, smoke, riots, vandalism, and sprinkler leaks.
• A broad form policy that adds more coverage, such as damage from broken windows and other structural glass, falling objects, and water damage.
• Special form coverage offers the widest range of protection, typically covering all risks (including theft) unless specifically excluded from the policy.

In most states, insurers refer to a broad form policy in reference to a comprehensive general liability insurance policy that provides a wide range of coverage that can be tailored to suit specific needs.

Some auto insurers have to offer broad form insurance options to businesses, which provide coverage for employees, executives, or any other person who is supplied a company vehicle, but who does not own a personal vehicle and, thus, does not have coverage under a personal auto policy. In such a situation, an endorsement may be added that gives protection while the named individual or spouse is driving a car borrowed from a third party.

Broad Form Insurance Example

In Michigan, for example, insurers can offer three types of auto collision coverage: limited, standard, and broad form. The protection provided by the three types of coverage differs based on fault in an accident:

1. Standard – Repair or replacement of an insured car is covered, regardless of fault. You'll be responsible for a deductible if you ever file a claim.
2. Broad – You'll only have to pay your deductible if you're found to be more than 50 percent at fault in a covered accident. If you're less than 50 percent at fault, you won't have to pay your deductible.
3. Limited – Repair or replacement of an insured car is covered only if the driver is less than 50% at fault. In this case, you'll have to pay your deductible. However, if the insured car's driver is more than 50% at fault, damages from the incident are not covered.