Commercial blanket coverage can apply to multiple locations or types of property. With blanket coverage, you can share one property limit among designated types of property or multiple buildings or locations. Blanket doesn’t necessarily mean without conditions, however. If you have a blanket limit, your policy’s schedules, sublimits, and clauses would still apply.
The word blanket can have different meanings with different lines of commercial insurance. To better understand blanket property limits and how they can be limited by sublimits or other policy clauses, our MyChoice team turned to a few resources. These include the Insurance Bureau of Canada’s business-coverage guide; the Risk & Insurance Education Alliance’s commercial-property guide, which covers coinsurance, valuation, sublimits and schedules; and the Business Development Bank of Canada’s insurance guide.
What Is Commercial Blanket Coverage?
Blanket coverage does not mean that, for example, property, management, cyber, and liability would all fall under one coverage limit. Only the described commercial property identified in the declarations, statement of values and endorsements is subject to blanket coverage.
For example, your broker may refer to blanket building and contents coverage; however, blanket coverage is not in effect unless spelled out in the policy.
Blanket coverage means that one coverage limit applies to several insured buildings, locations or categories of property as shown in the policy.
What Is The Purpose Of Blanket Coverage?
Blanket coverage can help businesses that may have more than one location or may have inventory that is on the move. The overall limit has to be high enough that blanket coverage makes sense, however, and it only applies to the locations and property categories included in the policy.
Blanket coverage means it is less likely that the policyholder will have too little coverage on one scheduled location or property category while some of the limit remains unused on another.
Flexibility
With a shared limit, the full limit applies to a larger covered loss at an individual scheduled location. A payment under a shared limit may be limited by margin clauses, occurrence limits, sublimits or the property description.
Simplicity
Even if you have a blanket limit, which may make the declarations appear simple, insurers may still require a statement of values. You must keep the statement of values up-to-date for building, equipment, stock and business-income values by location.
Potential Cost Efficiency
Depending on circumstances, blanket options may be more or less expensive compared to scheduled limits.
Compare the protection offered by each proposed policy before comparing costs. Quotes are based on values, construction, occupancy, protection, catastrophe exposures, loss history, deductibles selected and policy wording.
How Does Blanket Coverage Work?
| Policy item | What to verify | Why it changes a claim |
|---|---|---|
| Declarations | Blanket coverage ties a shared limit to particular properties and locations. | The shared policy limit applies only to the described property; blanket coverage does not extend beyond it. |
| Statement of values | Current replacement values and business-income values by location | Insurers use reported values for underwriting and may impose conditions on them. |
| Coinsurance | Required percentage and the valuation basis | If the blanket limit is inadequate, payment could be reduced even when the loss is below that limit. |
| Margin clause | Maximum percentage payable for a location or property category | The total limit may not be shifted to one property item that has been underestimated. |
| Occurrence wording | Per-occurrence, aggregate and reinstatement terms | It is not always clear how much blanket coverage remains for later losses after a first loss. |
| Sublimits and deductibles | Water, flood, earthquake, equipment, debris and other separate caps | A specific deductible or sublimit may apply before the blanket limit becomes relevant. |
| Newly acquired property | Automatic amount, eligible property, notice deadline and premium | Blanket coverage is subject to conditions and may be temporary, rather than permanent or automatically unlimited. |
How Does Blanket Coverage Work?
Here’s a rough outline of how you apply for blanket coverage and how it works:
- You list all the assets, locations, or exposures you want to cover under the blanket policy.
- The insurer and you agree on a blanket limit across all covered locations.
You also may agree to a coinsurance clause (e.g., 80%, 90%, or 100% coinsurance), which requires you to insure a certain percentage of the total value of your combined assets. If your insured value falls short, a penalty may apply in the event of a loss.
If a loss occurs, whether for any one building, for contents, or across multiple locations, the claim draws against the blanket limit rather than a fixed location cap.
In some structures, you may also have sub-limits or “floater” limits per location or per type of asset (e.g. contents, stock, equipment), but still within the umbrella.
Where The Word ‘Blanket’ Appears In Commercial Insurance
Do not confuse a blanket limit in a commercial-property policy with a blanket additional-insured endorsement, contractual-liability wording or a cyber aggregate, all of which might include the term “blanket.” They mean different things.
In a commercial-property policy, it’s important to know what constitutes the blanket. Is it buildings at multiple locations? Buildings and business personal property at a location? Buildings, business personal property and business-income values, if allowed by the form? This should be spelled out in the policy. Ask for a marked copy of the applicable declarations or endorsement.
Blanket Vs. Standard (Specific) Coverage
| Issue | Blanket property limit | Specific or scheduled limits |
|---|---|---|
| Limit structure | One limit applies to all properties or locations named within the blanket group. | A separate limit applies to each building, location or property category. |
| Value shifts | Blanket coverage may pay a larger covered loss for one item, subject to policy restrictions. | With specific coverage, payment is limited to the item’s stated limit even when another item has unused limit. |
| Records | Detailed values are still normally needed | Detailed values and limits are shown item by item |
| Main control | Consider the adequacy of the total limit, coinsurance, margin and occurrence wording. | Adequacy of each scheduled limit and its coinsurance terms |
| Best fit | Several values may move or be difficult to forecast accurately. | A defined cap for each distinct, relatively stable asset. |
Read More: Explore Business Insurance Options
How Blanket Limits Work In A Claim
Suppose a business has three locations. It lists replacement values that total $3 million and buys $3 million of blanket property coverage. One location, which is listed at a replacement value of $1 million, suffers a covered loss. It costs $1.2 million to rebuild. Absent margin or per-occurrence limits, the blanket limit may have enough shared limit for the $1.2 million loss. But suppose the policy provides a margin of 110%. That margin could instead cap the amount tied to the building at $1.1 million before the deductible and other terms. The exact result depends on the contract.
Coinsurance is calculated separately from the application of the blanket limit or the margin. For example, if it must carry 90% of current values, the required amount is $2.7 million. If the business meets the coinsurance requirement, it won’t be affected by coinsurance. However, if it buys less than the minimum amount dictated by the coinsurance provision, a formula will come into play.
Read More: See What a Certificate of Insurance Does and Does Not Prove
How To Set And Maintain A Useful Blanket Limit
- Model severe losses at the most asset-heavy location, including debris removal and business interruption.
- Keep the statement of values current after property purchases, plant improvements, major equipment transfers and significant inventory changes. Use current rebuilding costs, not book value.
- Have your broker list every deductible, catastrophe sublimit, margin clause and occurrence cap in writing.
- Calendar insurer reporting deadlines for newly acquired locations or property and confirm when additional premiums are due.
Read More: See How a Business Owner’s Policy Can Package Coverage