This problem arises from the fact that many providers in the home insurance industry continue to offer named-perils and broad-form policies, both of which are outdated. To make sure you're not blindsided when you have a claim, you should have a comprehensive (or all-risk) policy. A brief description of each type of policy follows.
- Named-perils policies only protect against loss types listed in the contract wordings. Typically, this includes fire or lightning, explosion, smoke, falling objects, impact by aircraft or land vehicle, riot, vandalism or malicious acts, some types of water damage, windstorm or hail, and theft or attempted theft. Unless you suffer loss or damage from a specified loss type, you're not protected.
- Broad-form policies provide comprehensive protection on buildings and named-perils protection on personal property. That means, for example, if you spill paint on your flooring and furniture during a home improvement project, only the resulting damage to your flooring would be covered under a broad-form policy. The damage to your furniture would be uninsured.
- Comprehensive (or all-risk) policies protect against all loss types except those specifically excluded in the contract wordings. Loss or damage due to wear and tear, snowslide or landslide, acts of terrorism, and war are some examples of the loss types typically excluded in comprehensive policies. Even with these exclusions, comprehensive policies provide the best available protection.