Broad Form Insurance Basics: Right for Your Car and Wallet?

Questions Answered:

• How does broad-form auto insurance differ from standard coverage?

• Is broad-form auto insurance right for me?

• What happens if I have broad form auto insurance and I lend my car to someone else?

You’re on the hunt for the cheapest auto coverage out there. You know, a policy that will satisfy your state’s requirement for liability coverage and keep you from getting busted for driving without insurance. You come across something called broad form insurance and you wonder: Is this what I need? It may be, as long as you can accept the limitations of this style of coverage.

What is broad form insurance?

Also called named operator insurance, it is a liability-only policy that covers you as a driver, for any vehicle you operate. At its core, broad-form insurance is a low-cost policy that’s intended to meet your state’s minimum liability requirements. The big catch is that broad-form coverage isn’t available everywhere. Only a few states offer it, including Idaho, Oregon, Ohio, and Washington.¹

Broad form vs. standard coverage

If you can get broad-form coverage in your state, you might like the idea of a low-cost policy that does just enough to keep you from getting cited for driving without insurance. But as you might expect, there are some trade-offs. Take a minute to review the key differences between broad-form coverage and standard auto insurance before you dive (or drive) right in. You need to know what broad-form coverage can do for you — but you also have to be comfortable with what this minimum coverage doesn’t do for you.

1. Broad form coverage insures you as a driver. Standard auto coverage insures your vehicle instead.

With a broad form policy, you have auto liability insurance whether you’re driving a car you own or a car you have permission to borrow. That’s an advantage for you as a driver, as you won’t have to worry about hitting the road without liability coverage. But it’s a disadvantage for you as a car owner, as explained in the next point below.

2. Your car isn’t covered by your broad form policy when you lend your vehicle to someone.

Because the insurance is on you as the driver, you need to be cautious about lending your vehicle to someone else. If that driver isn’t covered by a different broad form policy, he or she will be uninsured when behind the wheel of your car. Normally, that presents more problems for the other driver than for you, but it’s a situation you should avoid. If there’s an accident with damages, either you or the other driver personally will have to cover those costs.

3. Broad form coverage is liability only.

Liability insurance helps pay for any damage you cause to someone else’s person or property. It does not offer any protections for your vehicle, however. With a standard auto policy, you could choose to carry only liability coverages — but you do have the option to add coverages like collision and comprehensive which pay to repair your vehicle if it’s damaged in an accident, theft, or vandalism. You cannot add comprehensive and collision to a broad form policy.

4. Broad form coverage is secondary to any standard insurance that covers you.

You may, at times, be covered by two policies at the same time. This happens when you have a broad form policy and you borrow a vehicle that’s covered by standard insurance. Your policy covers you as the driver, while the car’s policy protects the car and anyone who has the owner’s permission to drive it. In this scenario, the standard policy that’s tied to the car is the primary insurance and your policy is secondary. That means any claims for damages are filed against the car’s policy first and your policy second.

The broad form is right for…

Now, on to the golden question, is broad-form auto insurance right for you? The answer differs for everyone, but here are some clues that this type of coverage might be a good option.

1. Drivers who don’t drive much.

Broad-form insurance is minimal coverage in the truest sense. This isn’t a good option when you have assets to protect, like money in the bank or home equity, you drive a lot, or you have a history of driving infractions and accidents. But if your car mostly sits in your driveway, you’ve never had an accident or gotten a ticket, and you don’t have much in the way of wealth, you might be a candidate for broad-form coverage.

2. You don’t own a car.

Without a car registered to you, you can’t get standard car insurance. Broad-form coverage is a good alternative if you want to make sure you’re covered whenever you do drive. It’s particularly appropriate if you regularly borrow the same car that’s owned by someone else, but you’ve not listed a driver on that car’s policy. In that scenario, when you use the same car often, the insurer may deny claims associated with damages incurred when you are driving.

3. Drivers who live in a state that offers broad form insurance.

If you can’t get broad form insurance in your state, you’re out of luck — unless you want to move, that is. Check with a local agent or broker to verify that broad-form insurance is offered where you live.

4. You are single and live alone.

As a single person who lives alone, you’re probably less likely to lend your car to someone — say, a roommate or spouse. You also don’t have to worry about coverage for your spouse or kids.

Broad form insurance is wrong for…

Broad form coverage has its drawbacks, and those drawbacks will be deal breakers if any of the following describe your situation.

1. Drivers who drive a lot.

The more you drive, the higher the chance you’ll have an accident. Accidents are bad, but they’re especially problematic when your only coverage is broad form. This is because your insurance only pays for damages to someone else’s property or someone else’s medical bills. You will get no assistance with the repairs needed for your vehicle.

2. High-risk drivers.

High-risk drivers don’t match well with broad form coverage, for the same reason noted above. If you have a higher-than-average chance of having an accident, it’s probably too risky for you to carry only minimum liability coverage.

3. Drivers with assets, including the car itself.

Car insurance actually protects your wealth as much as it protects your car. If you cause an accident and the damages cost more than the limits on your policy, you are personally responsible for the difference. The other driver can sue you, obtain a judgment, and then use various tactics to force you to pay — including seizure of any money you have on deposit with your bank. That’s why it’s wise to set your auto liability limits above the state-mandated minimums if you have a large savings account or even equity in your home.

The value of your car is a factor, too. A car that’s worth $1,000 probably doesn’t need to be covered by comprehensive and collision, because you wouldn’t want to invest your deductible in repairing it anyway. But if your car’s value is $10,000 or more, it’s wise to have it protected against accidents, theft, and vandalism with these extra coverages. In that case, you’re not a candidate for broad form car insurance, because it only provides you with liability coverage.

Broad Form: Not for everyone

Broad-form coverage may be a solution for you, but only if you understand what you’re giving up by not having standard auto insurance. Most drivers are better off paying a little more to have a standard policy with optional comprehensive and collision coverages. You can keep your premiums low by driving safely so you don’t have problems on the road and by selecting a higher deductible.