What Is Blanket Coverage and How Does It Work?
How does blanket coverage work? How are multinationals using blanket insurance coverage for commercial property protection? What’s the difference between blanket insurance, umbrella insurance and scheduled.Â
In terms of commercial insurance, blanket coverage provides additional protection in the case of a loss, but it necessitates a deeper understanding to evaluate if it is appropriate for your needs.
On the Declarations (Dec) page of a commercial property insurance policy, each site a company owns or occupies is listed. Then there’s the option of having various coverage categories for each location: buildings, contents (also known as business personal property), and business income. The coverage limitations for each coverage can then be set or covered.
For each coverage at each site, a specified limit is displayed, and each one has its own restriction. Instead of having each limit separate, a blanket limit aggregates the individual quantities into one bigger value.
It can be covered in a number of different ways. Depending on your demands, a policy can include a building blanket, a contents blanket, a company income blanket, or a combination of the two or three. (While most blanket limitations do not include all three coverages, it is possible to find them on some larger, multi-location property policies.)
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Blanket coverage is one of those topics that are easier to grasp when shown with examples. Let’s look at a few possible claim scenarios, assuming the policy included the following coverage:
- 123 Belmont Avenue, Chicago – Building: $1,000,000
- 123 Belmont Avenue, Chicago – Contents: $500,000
- 135 Hollywood Boulevard, Los Angeles – Building: $2,000,000
- 135 Hollywood Boulevard, Los Angeles – Contents: $500,000
- Combined Blanket Limit: $4,000,000
Listed above are some of the blanket policy examples that are available in the United States.
For example, if 123 Belmont Avenue, Chicago experienced a fire, they would have $1,000,000 in building coverage and $500,000 in contents coverage to cover the fire damage under a specific limit policy. They could utilize the entire $4,000,000 maximum to replace or repair the facility and/or contents if they had a building and contents blanket coverage.
Alternatively, if a tornado struck both buildings, while the $4,000,000 limit would still apply to both, it is highly specific in terms of what pertains to each location and coverage. With blanket coverage, however, if 135 Hollywood Boulevard, Los Angeles had $750,000 worth of contents to replace instead of the $500,000 indicated, they would be able to do so. They are capped at $500,000 due to a certain limit.
Because industry surveys suggest that 75% of commercial buildings are underinsured, having a blanket limit is extremely crucial to consider. If the building isn’t insured for the full replacement cost, the blanket limit gives you some “wiggle room. It’ll also come in handy if you buy new equipment or relocate your things. A blanket limit would be especially advantageous in today’s market since material and construction costs are continuously fluctuating.
Is Blanket Insurance Coverage for My Company?
Here are some things to think about before deciding if it’s right for your company.
Blanket limitations are more expensive than specific limits. When comparing the cost of a policy, coverage for buildings is frequently less expensive per dollar of value than coverage for contents. A separate building and contents blanket will normally cost less in the long run than combining both the building and contents into a single blanket limit.
To ensure that you are not underinsured or underpaying for your risk, the insurance provider will often require that the building and/or contents be covered to 90 percent or even 100 percent of the anticipated replacement cost.
The insurance company may consider 80 percent coinsurance on a set limits policy, so your values may not need to be as high.
A blanket restriction is frequently combined with an endorsement of Agreed Value. In the case of a loss, you won’t have to worry about the coinsurance provision because of this endorsement. The term of an agreed value is usually one year. The insurance carrier will most likely ask you to examine the breakdown of the building and/or contents limit at each site every year to ensure the values are current and accurate.
A “Statement of Values” is the name for this breakdown, and many insurance companies may need you to sign it as part of your renewal.
Many policies additionally include an automatic inflation rider of 2-4 percent to ensure that the limits keep pace with the cost of inflation and that the policy does not become underinsured.
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How to Get Blanket Coverage in the United States
A careful discussion with an independent insurance agent is the best way to determine if blanket coverage makes sense for your organization. They can use a replacement cost calculator to ensure that your structures are properly insured. They can account for the discrepancy in particular or broad limitations. They can also inform you of any coinsurance or margin clauses in the policy so you know exactly what you’re getting.
Frequently Asked Questions About Blanket Coverage in the U.S
Below are some of the most frequently asked questions about blanket policy:
- What is the definition of blanket coverage?
- How does a blanket insurance policy work?
- What is the difference between blanket coverage vs scheduled?
- Does blanket policy in fire insurance work?
- Where can I get a blanket policy in marine insurance?
- How can I compare blanket insurance quotes for a commercial property?
- Which company sells the best blanket policy in New York, Chicago, London, Los Angeles, Dublin and Melbourne?
