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Blanket Insurance: How It Works

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Joel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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Blanket insurance policies allow an insured to “cover” (thus blanket) multiple pieces of property or multiple property locations with a single policy.

The most common way to insure multiple properties or multiple locations is to list them separately, along with the amount of applicable insurance next to each on the policy declarations page.

Listing property separately is referred to as “scheduling,” and “specific insurance” is the term used to describe this method of insuring the property.

Here’s an example of blanket insurance:

  • $250,000 coverage for building 001 at property address 123 Oak Street, Joliet, IL 60435
  • $50,000 coverage for business personal property (BPP) at property address 123 Oak Street, Joliet, IL, 60435

Ultimately, you have two separate limits of coverage for the building and the business personal property (BPP).

You may also have separate locations that contain their own BPP, both with their own separate limits.

Instead of going this route, another option is a blanket insurance policy.

A blanket policy covers either multiple pieces of business property and/or multiple property locations with one limit of insurance.

Let’s look at an example of how this coverage would look for the same business, only with a blanket coverage amount:

  • $300,000 blanket coverage on the building and BPP at 123 Oak Street, Joliet, IL, 60435.

Why Blanket Insurance?

There are really two instances where blanket insurance coverage would benefit you as an insured.

First, imagine you had multiple property locations with BPP within them.

If you purchase specific insurance, it would be necessary to determine as close as humanly possible, the exact value of the building and the property inside.

In the event of an insurance claim at a single location, a fire for example, you will only be able to collect up to the policy limits (assuming you met the co-insurance requirement).

What would you do if you underestimated the value of the building and property within? Odds are, you’d be out of luck and would have to simply accept the amount you were insured for.

With blanket coverage, your limits of the blanket, which would be much higher, would very likely be high enough to cover a claim at any one location.

Specific Insurance vs. Blanket Insurance

Specific Insurance

Building 1: $200,000 coverage

BPP at Building 1: $50,000 coverage

Building 2: $200,000 coverage

BPP at Building 2: $50,000 coverage

If you suffered a loss at Building 1, where $75,000 worth of BPP was destroyed (as a result of your property value estimate being too low), you would not be able to recover all of the damages to your property.

Blanket Insurance

Building 1 & 2: covered at $400,000 “blanket”

BPP at building 1 & 2: covered at $100,000 “blanket.”

The same peril that damaged the property would easily be covered under the $100,000 blanket…no questions asked.

Of course, you would have to meet the co-insurance requirement, which states you must carry coverage equal to at least 90% of the true value of your buildings and business property at the time of the loss.

This means you must have been carrying at least $90,000 in BPP coverage at the time of the loss.

If you carried $100,000 in coverage for BPP, you would technically be covered up to $111,111.11 worth of damage (expressed as $100,000/90% = $111.111.11).

Commercial insurance can be difficult to understand and there are many factors and coverage types available in today’s marketplace.

It’s always a good idea to sit down with an independent insurance agent who specializes in commercial insurance to make sure you are properly covered at the best price possible.

(photo: Henry Burrows)

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