Peril Levels: Basic vs. Broad vs. Special Forms

For an insurance adjuster, the definition of a "peril" is fundamental. A peril is a specific cause of loss, such as fire, windstorm, or theft. When you are assessing a claim, the first question you must answer is: "Is this cause of loss covered under the policy?" To answer this, you must understand the three primary levels of peril coverage: Basic, Broad, and Special Forms.

The level of coverage chosen by the policyholder determines which events are insured and, perhaps more importantly for the adjuster, who bears the burden of proof during a claim. This article breaks down these levels to help you prepare for the complete Independent Adjuster exam guide and excel in your field work.

The Basic Form is the most restrictive level of coverage. It is a Named Peril policy, meaning only the causes of loss specifically listed in the policy are covered. If a loss occurs from a cause not mentioned, there is no coverage.

Standard Basic Form perils typically include:

• Fire and Lightning: The core perils of almost every property policy.
• Internal Explosion: Such as a water heater exploding inside the home.

Most Basic policies can be expanded by adding Extended Coverage (EC) perils, often remembered by the acronym W.H.A.R.V.E.S.:

• Windstorm
• Hail
• Aircraft
• Riot/Civil Commotion
• Vehicles
• Explosion (External)
• Smoke

Adjusters must also look for VMM (Vandalism and Malicious Mischief), which is often an optional endorsement on Basic forms but standard on higher levels.

The Broad Form is also a Named Peril policy, but it adds several significant causes of loss to the Basic list. For the Independent Adjuster exam, you should memorize the "BIG AFFECT" acronym to identify Broad Form perils:

• Burglary damage (damage to the structure caused by burglars).
• Ice, snow, and sleet (weight of).
• Glass breakage.
• Accidental discharge or overflow of water or steam.
• Falling objects (e.g., a tree falling on a roof).
• Freezing of pipes/plumbing.
• Electrical current (sudden and accidental damage from artificially generated electricity).
• Collapse.
• Tearing asunder (sudden cracking or bulging of heating/AC systems).

Crucial Note: For "Falling Objects," the exterior of the building must usually be damaged first for the contents inside to be covered.

The Special Form (found in DP-3 or the dwelling section of HO-3) represents the highest level of protection. Unlike Basic and Broad, it does not list covered perils. Instead, it covers all risks of direct physical loss unless the cause is specifically excluded.

Common exclusions that apply even to Special Forms include:

• Ordinance or Law
• Earth Movement (Earthquake)
• Water Damage (Flood, sewer backup, seepage)
• Power Failure occurring off-premises
• Neglect and Intentional Loss
• War and Nuclear Hazard
• Wear and Tear/Gradual Deterioration

As an adjuster, when handling a Special Form claim, your investigation shifts from looking for a covered peril to looking for an applicable exclusion. If no exclusion fits the facts of the loss, the claim is generally payable.