“It’s Not Covered”

The bulk of consumer complaints toward insurance companies can be traced to a single reason: denial of claims. And why are claims denied? Usually because the consumer is not aware of what his or her insurance policy covers and what it doesn’t. Auto insurance policies in Michigan are highly regulated and required to include certain statutory coverage, making them all pretty much the same (with the exception of liability limits and deductibles), but homeowners policies can differ greatly.

It’s not about what is covered and what isn’t covered; it’s about when something is covered. In other words, what triggers coverage. The vast majority of homeowners policies in today’s market feature Special Form coverage on the dwelling itself, but only Broad Form coverage on contents. So what’s the difference? Here it is in a nutshell:

Broad Form

The important thing to note about Broad Form coverage is that it only applies to named perils. This means thatif the peril responsible for the loss is not specifically named in the policy, there is no coverage. If something happens that’s not on the list, you’re not covered. However Broad Form is designed to cover the most common forms of property damage. The perils included in a typical Broad Form policy are:

Fire, Lightning, Windstorm or Hail, Explosion, Smoke, Vandalism, Aircraft or Vehicle Collision, Riot or Civil Commotion, Sinkhole Collapse, Volcanic Activity, Burglary/Break-in damage, Falling Objects (like tree limbs), Weight of Ice and Snow, Freezing of Plumbing, Accidental Water Damage (limited), Artificially Generated Electricity

Special Form

In a Special Form policy, all perils are covered except for those excluded. In this sense, a Special Form policy is the opposite of a Broad Form policy. All unlisted perils are covered perils, so if a peril is on the list, the policy will provide no coverage. The perils excluded in a typical Special Form policy are:

Ordinance of Law, Earthquake, Flood, Power Failure, Neglect, War, Nuclear Hazard, Intentional Acts

So back to the typical homeowners policy, which features Special Form coverage on the dwelling or building, but only Broad Form coverage on the contents. When would this be an issue? Here are some examples of claims that would be covered under Special Form, but not under Broad Form:

  • A deer jumps through a picture window and goes wild, damaging walls and furnishings before escaping the house.
  • A washing machine’s load becomes unbalanced. As the washer’s spin cycle starts, it moves from its position, hitting a water heater and poking a hole in the heater’s casing and liner.
  • A person walking on the floor joists of his unfinished attic slips off of the joists and falls through the living room ceiling, causing extensive damage.
  • A two-year-old boy finds a hammer and goes on a hammering spree throughout the house, seriously damaging drywall, a toilet bowl, a sink, furniture, and other items.
  • A bucket of paint falls off a ladder, crashing through furniture and spilling paint everywhere.
  • A broken water main under a city street causes water to rush into the lower level of a home, ruining all its contents.

What form is your policy written on?

Nicholas Chapekis Jr., CIC, CRM