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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Aug 25, 2021

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Ever heard of a “broad form auto insurance” policy?

This type of auto insurance is usually dirt cheap, as it only provides liability insurance (uninsured motorist coverage and personal injury protection can be added), and eliminates the variable of risk for the insurer by excluding every human being on the planet, other than the named insured, for coverage. It might seem harsh, but sometimes in order to be a safe driver, cost has to be taken into consideration. And sometimes that means looking into broad form coverage.

Also, there is no option to purchase physical damage coverage, which keeps the costs down.

It may also be referred to as “Broadform Named Operator Coverage.” The “Named Operator” portion is the crux of the broad form auto liability policy.

Essentially, this is a policy for the individual who lives alone and NEVER allows anyone else to drive their car.

What are some key notes for this type of policy?

– Coverage is only provided for the person who is named as the insured party – no one else is covered if they borrow your car. Keep in mind that because of this, you can still be sued for damages resulting from someone else driving your car. Even if they claim to be a safe driver and have a squeaky clean driving record, in the off chance they get into an accident, you will be liable.

– It is a liability-only policy: No coverage is afforded for physical damage to the vehicle.

– You can drive any car you own or have permission to use. Whether it’s one or 20 different cars, it doesn’t matter, and the cars don’t even have to be listed on the policy. There is no physical damage coverage so the insurer doesn’t care what car you are in, as long as you didn’t “borrow” a vehicle without permission.

– Broad form coverage is secondary for insurance claims purposes if you borrow someone else’s ride that has existing coverage.

Example: You cause an accident that injures somebody while driving a borrowed car (that is listed on another policy). The car owner’s liability limits would have to be exhausted before the broad form policy will cough up any money.

– We are talking cars only: No coverage while on a motorcycle or operating a vehicle for business use, which would require a commercial vehicle insurance policy.

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Why should you tread cautiously with broad form policies?

Trying to purchase this policy to save money, when you are not the only driver of a vehicle, is a huge mistake and will not work out for you. There are plenty of coverage options out there and ways to save money, it may just take some time to look into them. But it would be in your best interest to look for some sort of coverage policy that will protect you a little bit more than broad form coverage would.

Many claims from this type of policy end up in court, as it is almost inevitable that a person not listed on the policy (but actually drives the car) will get into an accident if you have it long enough. You’ve been warned.

Another thing to consider is that this type of coverage can be confused for broad form comprehensive coverage for an automobile, which is on the opposite end of the spectrum from the policy described in this post.

Broad form comprehensive coverage actually “broadens” the types of losses you are insured against.

Typically, comprehensive auto insurance coverage limits the types of damage you are covered against to some pretty basic items. Broad form “comp” insures you against just about anything that can damage your car.

Note: The broad form named operator policy can be difficult to understand and lends itself to potential abuse (a cheaper policy), but can land you in hot water financially if someone else operates your vehicle and causes bodily injury or property damage to someone else.

This policy form is not available in every state. In fact, some states that offer it are currently reviewing the policy forms to determine if it satisfies the legal requirement for a state minimum car insurance.

Why? It’s VERY restrictive in some respects (and very unrestrictive in others). In fact, it can be referred to as a “restrictive form” policy by insurance professionals.

You will likely never hear it called by that name, as it’s difficult to sell an insurance policy by using terms like “restrictive” when you’re referring to coverage!

It may seem like a daunting task, but look into the types of coverage that companies offer. If you’re on a budget, make sure that the cheapest policy is still going to have your back. Be sure to speak to a local independent insurance agent if you have more questions regarding either of these types of car insurance.