Insurance Coverage - Know Your Perils!

[Justin Sloan]

Make sure when you buy an insurance policy for your investment property (especially "flip" properties) you are asking for "special" perils. 

Peril - A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft

Basic Form (NOT GOOD COVERAGE!!!!) - Basic Form (peril) policy tends to be quite limited in scope and should be used with care. It is usually offered by carriers when the property is not in good condition, is under remodel, vacant or is old and without wiring, plumbing or heating updates. Coverages included in a typical Basic Form policy are:

Fire

Lightning

Windstorm or Hail

Explosion

Smoke

Vandalism

Aircraft or Vehicle Collision

Riot or Civil Commotion

Sinkhole Collapse

Volcanic Activity

Broad Form (NOT GOOD COVERAGE EITHER!!!) - Broad Form (peril) policies offer more coverage than Basic Form. They include coverage for all of the same hazards in a Basic Form policy plus several additional hazards which are expressly named. Like the Basic Form policy, a Broad Form policy covers only named perils. Coverages included in a typical Broad Form policy are the same as in the Basic Form policy plus the following;

Burglary/Break-in damage

Falling Objects (Tree’s)

Weight of Ice and Snow

Freezing of Plumbing

Accidental Water Damage

Artificially Generated Electricity

Special Form (THIS IS WHAT YOU WANT!!!)- Special Form (peril) policy reads opposite of a Basic or Broad Form policy. All unlisted perils are covered perils. This can be extremely beneficial to the insured and is the ideal coverage to have. Common Special Form Policy Exclusions:

Ordinance or Law

Earthquake

Flood

Power Failure

Neglect

War

Nuclear Hazard

Intentional Acts