Named Perils, Comprehensive, and Broad Form: Which Home Insurance Policy Is Best for Your Needs?
Your home is probably one of the biggest investments you’ll make in your lifetime – that’s why it is so important to protect it with the right type of home insurance policy.
Home insurance helps provide peace of mind, as it protects you from financial loss if your property or possessions are damaged, lost, or stolen. It may also help cover your living expenses if your home is temporarily uninhabitable.
There are many types of home insurance policies, each designed with a different type of homeowner in mind. The three most common kinds are:
- Named perils policies
- Comprehensive policies
- Broad form policies
Before committing to one policy, it’s crucial to understand what it entails and make sure that it caters to your unique needs. Here, we break down these three common types of home insurance policies, what they cover, and which one may be best for you and your home.
Named Perils Policies
A named perils insurance policy provides coverage on losses incurred on your property and possessions only if they are caused by the hazards or events listed in your policy. Named perils coverage is usually a less expensive alternative to broad form or comprehensive policies, as it provides the narrowest coverage.
A peril is an expected event that can cause damages or loss such as fire, theft, flooding, burglary, or vandalism. Not every named-perils policy covers the same list of perils, but here are some common ones that you’ll find in almost every home insurance policy:
- Fire, lightning, and explosions
- Hail and windstorms
- The impact from a vehicle or aircraft
- Civil disturbances or riots
- Falling objects
In general, named perils policies’ coverage is too narrow for most homeowners. Insurance providers would only suggest this type of policy in certain circumstances, such as a house under major renovations or a vacation home in a remote area.
While choosing a named perils policy may be a way to save some money on monthly premiums, only having narrow coverage has a substantial risk of incurring an uninsured loss, the cost of which can outweigh years of premium savings.
Comprehensive home insurance policies offer the broadest protection out of all three types. They protect your home and possessions from any peril unless specifically excluded in the policy.
Every comprehensive home policy includes a section on what is excluded from coverage. What is listed will differ depending on the insurance company and the policy. If something is not listed in the section, it means that it is covered.
With a comprehensive policy, the burden of proof lies with the insurance company. This means that in order for the insurance company to deny a claim, they have to prove that the claim falls within the policy’s exclusions.
This differs from a named perils home insurance policy, where the policyholder has the burden of proof and they have to show that the claim falls within the named perils.
While the list of exclusions may differ, here are some that apply to the majority of comprehensive home insurance policies on the market:
- Maintenance-related claims. Loss events that can be prevented through routine maintenance are usually not covered. This may include corroding pipes or a rotting roof.
- War or terrorism. These events are highly destructive and almost impossible to quantifiably predict.
- Most large-scale natural disasters. Natural events such as earthquakes, floods, and tsunamis are often excluded, especially if your home is in a high-risk area. However, you can choose to purchase coverage for these catastrophic perils as an add-on to your existing policy.
- Events or items covered by other forms of insurance.
- Any fraudulent activity.
Broad Form Policies
Broad form is the middle-of-the-road policy option. It provides wider protection than a named perils policy, but not as much as that of a comprehensive policy. The premium of a broad form policy also usually falls in the middle of all three types of home insurance.
With broad form home insurance policies, the coverage you receive is divided between the dwelling and its contents. The dwelling is the physical house and any attached structure, such as balconies or a garage.
The contents are your possessions inside the house, including any furniture, electronics, clothing, etc. Broad form policies provide comprehensive coverage on the dwelling and only named perils coverage for possessions.
For example, if a power surge causes fire damage in the house and damages the electronic appliances in your home, having a broad form policy means that:
- Your scorched walls are covered (if a power surge is not listed as an exclusion in the policy).
- Your damaged electronics are not covered, and you will have to replace them out-of-pocket unless a power surge is listed as one of the named perils in the policy.
From this example, you can see how broad form differs from comprehensive home insurance policies. If you want to insure your dwelling and do not have much of great value inside the building, you might consider a broad form insurance policy.
Purchasing the right home insurance can be complicated, but it doesn’t have to be. If you find the world of insurance and its jargon too overwhelming, we suggest speaking with a knowledgeable insurance broker to find a policy that suits your unique needs.
At Oegema, Nicholson & Associates, we offer a fully customizable assortment of home insurance options in Ottawa so you can pick and choose to build a policy that fits your circumstance exactly. This means that you and your biggest investment are never underinsured. Get ultimate peace of mind with the home insurance policy you need by calling 613-704-7766 today or contacting us here.