Property Insurance: What Is Special Form Insurance?
What does special form mean for your property insurance?
If you are a homeowner or building owner, when looking at your property insurance policy, few things may make sense.
The dwelling or building limit does, or at least, one hopes. Beyond the total amount the insurer would pay due to a loss, it gets wordier and more “insurancy.” And then, you arrive where it says “causes of loss.”
Beneath that, the wording of your policy says Special Form. How special, you think, but what does it mean?
This isn’t the type of “special” your mother thinks you are, by the way. Wait, your mother didn’t say that to you? This is an insurance website, not a therapy session.
Special Form: What It Is
When property coverage is written on a “special form” causes of loss basis, it’s good news for you. This means that only certain causes of a claim spelled out in the policy are excluded. Assuming no other negating factors, this also means that there is apparent coverage for causes of loss not mentioned by the policy.
This is what’s called “open perils” coverage in that it is far broader than the alternatives. We will get to those in a moment. An “open perils” form only excludes property coverage for a specific list of causes, but is open to all else.
For example, a typical Special Form causes of loss form within a policy excludes such things as earth movement, nuclear hazards, war, and floods. These are exclusions you’re likely to see in most insurance policies, anyway. Everything else not listed in the policy is fair game as far as coverage. Don’t take our word for it, though: review your claim, if you have one, with your insurance carrier to confirm coverage.
This used to be called “All-Risk,” but it isn’t all risks, just everything except things specifically excluded. Unfortunately for insurance companies, courts started interpreting “All-Risk” literally, so bye-bye that went.
Side Note: You may have a mortgage company or a party with whom you sign a contract that is stuck in the past. Their insurance requirements may ask for proof of “All-Risk Property Insurance.” This is an antiquated term and they really mean “Special Form.”
Special Form: How It Differs From The Others
Special Form is a significantly more extensive causes of loss form than the others available. One is called “Basic Form” and the other is “Broad Form.”
Both of these other two are called “Named Perils” forms, as opposed to the “Open Perils” form mentioned earlier. In these policies, there is potential coverage for only those causes of a claim listed in the policy. The result is a much narrower scope of coverage.
With the Basic Form, fire, lightning, and internal explosion are the main causes of loss covered. There are others, like windstorm/hail, smoke, and aircraft. A policy written on this basis will be confined to only those things listed, unlike the Special Form policy. The Broad Form causes of loss is like the Basic, but with a few extras, such as falling objects and water damage.
Special Form: Should I Have It?
If Special Form causes of loss are available to you, absolutely ask for it. There is no reason to be limited to a set of claim triggers when it can be open-ended. Keep in mind that willful destruction of property, for example, is excluded by all policies.