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Definition: Broad Form Insurance
A standard insurance policy will cover the basic needs of the insurer. In many cases the insurer goes for a policy since it is a mandate by the regulatory authorities. However, in case the insurer wants to be protected against some rare events that may be of serious risk and it would be very expensive to bear the costs of damage, then he / she can go for a ‘broad form insurance’.
This form of insurance is a kind of extension to the standard or the basic insurance policy and would cover additional unusual and uncommon situations but a higher premium and often a deductible would need to be paid
Example: of the broad form insurance can be seen in case of auto insurance coverage policies. The standard insurance policy does not cover the windshield / glass damages. If the insurer is an extensive user of the vehicle and has high probability to incur damaged glass due to flying rocks on the freeways, he / she will specifically request a broad form insurance to cover the damaged windshield costs by paying a higher premium.
Although the standard insurance will be cheaper, the broad form insurance will provide greater coverage. It is not easy to predict which form of insurance will provide more value. Businesses or individuals may go for a standard form insurance when they just require it by law. If they expect to encounter unusual / rare damages to the business or asset, they can go for a broad form insurance. The standard for policy coverage may differ from company to company but it will always have lesser coverage compared to a broad form insurance.