Special Form Insurance Policies Don’t Actually Cover “All-Risks”

Basic, Broad and Special Form Insurance Policiesread your insurance policy

Often when purchasing an insurance policy the insured has a choice between three different types of coverage. This usually comes up in homeowner’s, renters and commercial property policies. The three different types are referred to as basic, broad or special form insurance. The coverage increases from basic to special form insurance and special form insurance is often referred to as an “all risk” insurance policy.

Basic Form Insurance Policy

The basic form policy is usually just the bare bones in insurance and for homeowners policies only includes coverage or certain named perils. This means that if the loss is caused by a peril that is not specifically named in the policy there is no coverage. The perils named in the basic form Homeowner’s policies include:
• Fire
• Lightning
• Windstorm or Hail
• Explosion
• Smoke
• Vandalism
• Aircraft or Vehicle Collision
• Riot or Civil Commotion
• Sinkhole Collapse
• Volcanic Activity

Broad Form Insurance Policy

The next policy that expands upon the basic form is the broad form policy which is still a named peril policy but is “broader” than the basic form and thus names more perils for which there will be coverage. This is again a named peril policy such that if the peril is not named and a loss occurrs there is no coverage for the loss. In homowner’s policies the named perils include the basic form list of perils above and then add the following:
• Burglary/Break-in damage
• Falling Objects (like tree limbs)
• Weight of Ice and Snow
• Freezing of Plumbing
• Accidental Water Damage
• Artificially Generated Electricity

Special Form Insurance Policy

The confusion arises with the third type of policy known as the special form which is often erroneously referred to as an “all risk” policy. This is not a named perils policy, but covers all perils except that which is excluded. It is the “that which is excluded” language that generally confuses the insured. Sometimes the policy owner reads that he has purchased an “all risks” policy and doesn’t read any further. On a special form the named perils are that which are excluded. So if the excluded peril causes the damage, then there is no coveraage. So in a homeowners policy that which is excluded is the following:
• Ordinance of Law
• Earthquake
• Flood
• Power Failure
• Neglect
• War
• Nuclear Hazard
• Intentional Acts

Not “all risks” are covered in a special form insurance policy

It is generally well known by most insureds that earthquake and flood are excluded from homeowners and only covered by special endorsement or a separate policy. In fact earthquake in California was only written by the state’s California Earthquake Authority up until just recently when two private insurers have now entered the fray of earthquake coverage.

It is important to remember however, that an “all risk” policy does not exactly cover everything and in fact most insurers will not use the term “all risks” because of the confusion that title causes.  Remember, if you are confused as to your coverage, you need to talk to your agent or broker who should be able to explain your coverage. Certainly you can always call First Capital Insurance Services at (818) 451-3878 and they will find the insurance you need and carefully explain the  coverage you are getting.