Broad Form vs Special Form Home Insurance
Broad form covers only named perils. Special form covers every cause of damage except what's specifically excluded.
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Your lender almost certainly has a minimum in mind, and it's usually special form for the dwelling. The reason comes down to what gets paid. Under broad form, if the cause of damage isn't on the named list, there's no payout, even if the house is unlivable. Special form covers any cause except what's listed as excluded, which is a much wider net. Before you bind a policy, ask your lender directly what form they require, because some will reject a broad form binder and delay closing.
Know what your lender needs before you bind
Insurers price this coverage differently, and some won't offer what your lender requires at all. Comparing quotes now shows which ones do, so your binder gets accepted the first time and closing stays on schedule.
What actually counts as a named peril
Broad form policies list the causes of damage they cover. Fire, lightning, windstorm, hail, explosion, theft, vandalism, and a handful of others. Usually around 16 to 18 named perils, though the exact list is in the policy itself, not something you should assume from one insurer to the next. If a pipe freezes and bursts because the heat failed, or a tree falls on the garage in a storm that isn't technically a windstorm, whether you're paid depends on whether that exact cause appears on the list.
Special form flips the logic. Instead of listing what's covered, it lists what's excluded, usually things like flood, earthquake, and normal wear. Everything else is covered by default. That's why lenders lean toward it for the dwelling itself, the structure they have a financial stake in. A wider range of accidents and disasters get paid without you having to check whether the specific cause made the list.
Here's where it gets confusing for a lot of buyers. Many standard homeowners policies, the HO-3 being the common one, actually split coverage by part of the house. The dwelling and other structures get special form treatment. Personal belongings inside the house, under what's called Coverage C, are often still covered on a named-peril basis even in an HO-3. An HO-5 extends special form to belongings too, which is broader but usually costs more. So when your lender says they want special form, they almost always mean the structure, not the contents, and it helps to know that distinction before you start comparing policies.
None of this is printed in plain words on a rate quote. The declarations page will tell you which policy form you're being sold, HO-2 for broad form or HO-3 and HO-5 for special form variants, but it won't explain what that means for a specific type of damage. If you're not sure whether something that worries you, old wiring, a sump pump, a detached shed, would be covered, the way to find out is to ask what's excluded, not what's included. With special form, the exclusions list is shorter and more useful to read than the inclusions ever would be.
What exclusions actually show up on a special form policy
Even though special form covers everything except what's excluded, that exclusions list still matters a great deal, because a few of the things left off tend to surprise first-time buyers. Flood damage is excluded on every standard homeowners policy, broad or special form, and so is earthquake damage. Both require separate policies entirely. If the house sits in a flood zone, your lender will likely require flood insurance on top of whatever homeowners form you choose, so that's worth asking about early rather than finding out at closing.
Wear and tear, mold from a long-term leak, pest damage, and sewer backup are also commonly excluded or limited, even under special form. Sewer backup in particular catches people off guard, since it's often sold as a separate add-on called an endorsement rather than being built into the base policy. If the house has an older sewer line or sits somewhere with a history of backups, that's a coverage worth pricing out specifically rather than assuming it's already there.
Water damage generally gets more attention in the exclusions than people expect. A pipe that bursts suddenly is typically covered under special form. Water that seeps in gradually because of a slow leak you didn't notice usually is not, because insurers treat that as a maintenance issue rather than a sudden loss. The distinction between sudden and gradual comes up constantly in claims disputes, so it helps to know it exists before anything happens, not after.
None of these exclusions are unusual or a sign of a bad policy. They're standard across the industry and show up on nearly every special form policy you'll be quoted. The point of reading them isn't to find a policy without any, since that policy doesn't exist, but to know which ones matter for this particular house. An older roof, a finished basement, a septic system, each of these points toward a specific exclusion or endorsement worth asking about by name when comparing quotes, rather than assuming the base policy already handles it.
Before you bind a policy
Check your declarations page for HO-3, HO-5, or HO-2 listed near the top. Match it against whatever your lender asked for in writing, then confirm it before closing day arrives.
