Blanket insurance covers multiple items or locations all at once, the way a blanket covers all items underneath it. You can apply blanket insurance to multiple locations of a business, all your building contents, all of one kind of business property (such as mobile equipment) or all your staff (as opposed to insuring just a few who handle financial accounts or work abroad).
Blanket insurance is a convenient way to spread coverage across many similar insurable entities or items. It means the entire payout limit of your policy is available to even one location should a catastrophe occur. Many businesses with multiple locations that are similar, such as dry cleaners, gift shops or pizzerias, will insure them all under one commercial property policy on a blanket basis.
Some companies prefer blanket policies because they insure inventory or business property that is moved between locations. For example, imagine you need to temporarily move computers or inventory from one location to another for a conference. With a blanket policy, you would not have to adjust your coverage. No matter where your business property is under the blanket policy, it is insured.
While blanket insurance is convenient, there are some serious caveats when it comes to property insurance. And it’s especially important to understand those caveats if you have a margin clause in your commercial property policy.
How a margin clause works
A margin clause is a section of an insurance policy that limits how much a property can grow in insurable value from what was originally declared in the coverage contract, in what’s called the “statement of value.” The margin may be stipulated as a growth percentage, such as 25% growth in value, or as a value percentage, such as 125% of the stated value of a piece of property.
At claim time, your insurer will calculate the allowable increase and determine whether your current valuations are within your margin. Anything outside your margin of allowable increase in value will not be insured.
For example, say you have three buildings valued initially at $2 million each, for a total value of $6 million. The properties are all insured under blanket coverage. Your blanket policy includes a margin clause that limits the growth in value of coverage to 25%. Even if the market changes and the cost of repairing the buildings rises to $7 million, you would still have full coverage. That’s because the new value of $7 million is within the 25% margin of your total original stated value of $6 million.
If, however, the value of your property increases to $8 million, your insurance payout would fall short.
Not only that, but you could be hit with a penalty for underinsuring your property.
Your agent or broker can help you fully understand margins, their calculations across properties valued under blanket insurance, and any underinsurance penalties. They are a little complex, but you should understand them since they factor in to costs you will have to bear.
That said, blanket insurance is a very popular product. When it’s done right, it offers convenient, flexible protection for a broad set of properties. You might not be able to avoid margin clauses, but you can work within them by keeping your insurance policy up to date and increasing your limits if necessary. Make sure you work with your insurance professional to understand the ins and outs of blanket coverage and margin clauses. This will help you avoid any surprises at claim time.
FAQs
The Blanket Limit is a single amount of insurance shown in the Declarations. 2. Margin Clause a. For property subject to a Blanket Limit, the maximum loss payable will be computed by multiplying the Margin Clause Percentage shown in the Schedule by its value shown in the latest statement of values.
What is commercial blanket coverage? ›
Blanket insurance can cover more than one type of property at one or more locations, or one type of property at multiple locations, all under one policy and with a single limit. Blanket policies also offer protection for any equipment, inventory or furnishings located in or around the covered structures.
What is an insurance margin clause? ›
A margin clause is a section of an insurance policy that limits how much a property can grow in insurable value from what was originally declared in the coverage contract, in what's called the “statement of value.” The margin may be stipulated as a growth percentage, such as 25% growth in value, or as a value ...
What is the 105% margin clause? ›
A Margin Clause states that the most the insured can collect for a loss at a given location is a specified percentage of the values reported for that location on the insured's SOV. These percentages usually range between 105%-125%.
What is an example of a margin clause? ›
For example, say you have three buildings valued initially at $2 million each, for a total value of $6 million. The properties are all insured under blanket coverage. Your blanket policy includes a margin clause that limits the growth in value of coverage to 25%.
What is an example of a blanket limit insurance policy? ›
For example, a blanket limit of $1.5 million covering buildings and business personal property at one location; or a blanket limit of $3 million applying to all buildings at three locations. A blanket limit can apply to all types of property at all insured locations.
How does blanket coverage work in insurance? ›
Blanket insurance is a single property insurance policy that covers more than one type of property at the same location, the same kind of property at multiple locations, or multiple kinds or property at two or more locations.
How to calculate blanket limit? ›
Coinsurance options are most commonly 80%, 90% or 100%. Let's look at all 3 examples: If you elect 100% coinsurance, your blanket coverage would cover 100% of the cost to rebuild – $30,000,000. If you elect 90% coinsurance, your blanket coverage limit would be $27,000,000 (90% x $30,000,000.)
What is the difference between blanket coverage and scheduled coverage? ›
Blanket coverage is usually applied to an entire scheduled list of farm personal property. In most cases, all farm personal property is included. If there are items you do not want to cover, this may be where you would want to use scheduled coverage.
What is the margin clause in blanket property insurance? ›
A margin clause is used in blanket insurance as a tool to promote the accuracy of the limits of insurance of the property on the Statement of Values. The incentive for the insured is to avoid the penalty which is possible with a margin clause.
Insurers and Profit Margins
Many insurance firms operate on low margins, such as 2% to 3%. Smaller profit margins mean even the slightest changes in an insurance company's cost structure or pricing can mean drastic changes in the company's ability to generate profit and remain solvent.
What is the profit margin for an insurance company? ›
Taking these factors into consideration, most insurance agency owners operate with an average profit margin between 2 percent and 10 percent. Agency owners are advised to consult with an accountant or tax advisor when trying to structure your specific agency.
What is the average clause? ›
The Average Clause thus makes the Policyholder bear a proportionate amount of loss to the extent of Underinsurance. The purpose of Average Clause is to encourage the Policyholders to insure their property for the full value rather than underinsuring the Property and trying to save the premium.
What is the occurrence limit of liability clause? ›
A per-occurrence limit is a cap on the payout from liability insurance, which covers legal defense costs in the event of a lawsuit.
What is an example of escalation clause in fire insurance? ›
For example, if the escalation clause includes a 5% increase, the coverage amount will increase by 5% each year. This means that the policyholder will have greater protection against fire damage as the value of the property increases over time.
What does blanket limit mean? ›
Blanket limit is a single limit of insurance that applies over more than one location or more than one category of property coverage or both.
What does blanket limit coverage mean? ›
What is Blanket Coverage? Blanket limit coverage provides a total limit (amount of losses that can be paid) of insurance which can be applied to multiple locations or buildings. By contrast, a specific (also known as “scheduled”) limit of insurance, defines separate limits which are applied to each individual property.
What is the blanket limit amount? ›
A blanket limit often covers a number of different locations. For example, if a business purchases a $5 million policy for the multiple locations it owns in the city, each property potentially could be covered for up to $5 million. This amount could apply if it were the only property destroyed.
