what is covered by a basic cause of loss form

3 min read 23-12-2024

what is covered by a basic cause of loss form

Choosing the right insurance policy can feel overwhelming. One crucial element is understanding your cause of loss form. This article focuses on the basic cause of loss form, explaining what it covers and what it doesn't. Knowing this will help you make informed decisions about your business insurance needs.

Understanding Cause of Loss Forms: Basic, Broad, and Special

Commercial property insurance policies typically offer three types of cause-of-loss forms: basic, broad, and special. Each offers a different level of coverage. The basic form provides the most limited protection, while the special form offers the broadest. This article centers on the basic cause of loss form.

What a Basic Cause of Loss Form Covers

The basic form covers only named perils. This means it only protects against losses caused by specific events explicitly listed in the policy. These typically include:

Fire: Damage resulting from a fire is usually covered.
Lightning: Damage caused by a lightning strike falls under this coverage.
Windstorm or Hail: Damage from high winds or hail is typically included.
Explosion: Damage resulting from an explosion is usually covered.
Aircraft or Vehicle Damage: Damage caused by an aircraft or vehicle collision is generally covered.
Smoke: Damage caused by smoke (not necessarily from a fire) is often covered.
Riot or Civil Commotion: Damage from a riot or civil unrest may be covered.
Vandalism or Malicious Mischief: Damage from vandalism or malicious acts is often included.
Sprinkler Leakage: Damage from a malfunctioning sprinkler system is generally covered.
Sinkhole Collapse: Damage caused by a sinkhole is sometimes covered under a basic form. (Check your specific policy).

What a Basic Cause of Loss Form Doesn't Cover

It's equally important to understand what isn't covered by a basic cause of loss form. This is a significantly longer list than the covered perils:

Water Damage (most instances): Unless specifically caused by a covered peril (like sprinkler leakage), most water damage is excluded. This includes damage from flooding, sewer backups, or burst pipes.
Earthquake: Earthquake damage is almost always excluded.
Flood: Flood damage is typically not covered by a basic form, requiring separate flood insurance.
Power Failure: Damage resulting from a power outage is generally excluded.
Freezing: Damage from freezing pipes is typically not covered.
Weight of Snow, Ice, or Sleet: Unless it causes a collapse covered under other named perils.
Theft: Theft is typically not covered, requiring separate coverage.

The Importance of Understanding Your Policy

The differences between a basic, broad, and special cause of loss form are substantial. A basic form offers limited protection and leaves you vulnerable to many common types of property damage. Consider the risks associated with your business and the potential financial impact of an uninsured loss.

Should You Choose a Basic Cause of Loss Form?

A basic cause of loss form is typically the least expensive option. However, its limited coverage might leave you significantly underinsured. Weigh the cost savings against the potential for significant financial losses if an uncovered event occurs. Consult with an insurance professional to determine the best cause of loss form for your specific needs and risk tolerance. They can help you understand the nuances of each form and choose the coverage that provides the best balance of protection and affordability.

Frequently Asked Questions (FAQ)

Q: Can I add coverage to a basic cause of loss form?

A: Yes, you can usually purchase endorsements or riders to add coverage for specific perils not included in the basic form. However, this will increase your premium.

Q: What's the difference between a broad and special cause of loss form?

A: A broad form covers more perils than a basic form, while a special form covers all risks except those specifically excluded.

Q: How can I find out exactly what my policy covers?

A: Carefully review your policy documents. Contact your insurance agent or company if you have any questions or need clarification.

Understanding the intricacies of your commercial property insurance policy is crucial for protecting your business. While this article provides a general overview, always consult your specific policy documents and an insurance professional for personalized advice.