You might have heard of broad form insurance as a way to save some money on your car insurance. While it is true that broad form insurance is one of the cheapest car insurance options, it is not the answer for all drivers and situations.
Before you jump into calling your insurance agent to change your policy, let’s talk about what broad form insurance is, who it is a good option for and how much it costs.
What is broad form insurance?
Broad form insurance is minimal auto liability insurance for one named driver. One named driver means there is one driver listed on the policy and no other drivers are covered under the policy. You may be wondering why it’s called broad form if it only covers minimal liability. That doesn’t seem broad at all, right?
Most insurance policies are either basic form or broad form.
A basic form policy typically covers fire, explosions, storms, smoke, riots, vandalism, and sprinkler leaks.
A broad form policy typically adds more coverage for damage from broken windows and other structural glass, falling objects and water damage. This type of policy is intended to be supplemental, not stand-a-lone, because there are so many things it does not cover.
What is not covered under a broad form insurance policy?
Broad form insurance offers very limited liability coverage for the individual listed on the policy. Currently, there are only 11 states where broad form insurance is available because it does not meet other states’ minimum auto insurance requirements.
There are many things a standard auto insurance policy covers that a broad form policy does not cover:
- Comprehensive: non-collision damages to your car from things like theft, vandalism, fire, acts of nature and weather
- Collision: damages caused to your car from another vehicle, a fallen tree or other objects
- Personal injuries: medical costs associated with your own injuries
- Uninsured or underinsured motorist: costs for damages in an accident with an uninsured or underinsured driver
- Others driving your vehicle: damages incurred while someone else is driving your vehicle
When is broad form insurance a good option?
To avoid gaps in coverage that can lead to severe financial loss, broad form insurance is rarely a good option on its own. Here are some situations where broad form insurance may be an option, although it is essential to know there is significant risk involved:
- You have sufficient financial resources to pay out-of-pocket for losses and are only seeking minimum liability coverage.
- Your vehicle has very low value and you can afford to replace it.
- You do not own a vehicle and only occasionally drive other’s vehicles.
- You never have passengers in your vehicle.
The best use of broad form insurance is in the following situation:
- You are adequately covered under a standard insurance policy but are seeking some additional coverage.
What does broad form insurance cost?
Before you start comparing car insurance quotes, understand that comparing the cost of a broad form policy to the cost of a standard car insurance policy is like comparing apples and oranges. For example, in Colorado, the average cost of a full coverage policy is $1,948, but the average cost of coverage for a state minimum only policy is $553. There is a $1,395 difference in insurance cost but also a dramatic difference in coverage.
You will find a quote for broad form insurance to be lower in cost for the simple reason that it includes much less coverage.
The takeaway on broad form insurance
If you’re wondering, “why is car insurance so expensive” you are not alone. Car insurance, like any insurance, can be expensive. Before you consider reducing your coverage to a broad form insurance policy, we recommend looking for other ways to save.
Penny Gusner, CarInsurance.com’s senior consumer analyst, advises, “before you consider switching to broad form coverage, shop around for a standard policy. If you maintain a clean driving record, you may find that a standard policy doesn’t cost much more but will give you a lot more protection.”
Speak with your insurance agent to discuss ways to lower costs on a standard policy. Perhaps there are discounts you qualify for or bundling options you could select that would save some money. Shop around and get competitive quotes. And finally, keep a clean driving record. A clean driving record lets insurance companies know you are a low-risk driver and will result in lower car insurance premiums.