Is Your Blanket Policy Truly a Blanket Policy?
Mar 21, 2025
When it comes to insuring high-value commercial properties, understanding your policy structure is essential. Two common options are blanket limit policies and scheduled location policies. Each has distinct advantages, but the wrong choice—or inaccurate property valuations—can leave you exposed to significant financial risk.
Blanket Limit Property Policies: Flexibility with a Catch
A blanket limit policy provides a single coverage amount that applies across multiple properties. This flexibility allows you to allocate funds where they’re needed most in the event of a loss—but only if your property values are accurately reported.
How It Works:
Single Coverage Pool: Instead of assigning fixed limits to each location, a blanket limit covers all properties under one shared amount.
Protection Against Unexpected Losses: If one property suffers a larger-than-expected loss, the total coverage pool can absorb the cost—but only if the reported values are correct.
Valuation Accuracy Matters: If your reported property values are too low, you may face penalties that reduce the benefits of having a blanket policy.
Example:
A corporation owns five industrial facilities with a combined replacement value of $100 million. A blanket policy provides $100 million in total coverage. If one facility suffers a $30 million loss, the policy covers it, leaving $70 million for the remaining properties.
However, if the replacement cost was underreported—say the real value is $120 million—you won’t have full coverage. Underreporting property values negates the advantages of a blanket limit.
Scheduled Location Property Policies: Precision and Control
A scheduled location policy assigns specific coverage limits to each property based on its individual value. This structure ensures that each location has predefined protection, but it lacks the flexibility of a blanket limit.
How It Works:
Fixed Coverage Per Property: Each building has its own limit based on its appraised replacement cost.
No Shared Limits: If a property suffers a loss that exceeds its assigned limit, you must cover the shortfall out-of-pocket.
Precise Risk Management: Helps businesses with properties of varying values and risk levels ensure each one is adequately insured.
Example:
A company owns four office towers with the following replacement costs:
Tower A: $40 million
Tower B: $30 million
Tower C: $20 million
Tower D: $10 million
Each property is insured for its replacement value. If Tower A suffers a $50 million loss, the policy only covers $40 million, leaving a $10 million gap that must be paid out-of-pocket.
The Hidden Risk: How Margin Clauses Turn a Blanket Policy into a Scheduled One
Many businesses choose a blanket policy for its flexibility, but they don’t realize that margin clauses can strip away this advantage.
A margin clause effectively turns a blanket policy into a scheduled policy by limiting how much the insurer will pay beyond a reported value. If a property’s value is underreported, the policy won’t fully cover the loss—even if you technically have enough coverage under the blanket limit.
How It Works:
If a margin clause limits payouts to 110% of the reported value, then even if your blanket limit is high enough, an individual property can only receive up to 110% of its declared value—not what it actually costs to replace.
This negates the flexibility of a blanket policy, leaving you underinsured just like a scheduled policy would.
Example:
A manufacturing firm insures five plants under a $200 million blanket limit. One plant is reported at $40 million but actually costs $60 million to rebuild. Due to a 110% margin clause, the most the insurer will pay is $44 million, leaving the company $16 million short.
Margin clauses erase the benefits of a blanket policy if property values are underestimated.
The Solution: Accurate Valuations with Remit
The key to getting the most from your insurance—whether you choose a blanket or scheduled policy—is ensuring your property values are accurate.
At Remit, we provide precise, defensible replacement cost valuations so you can:
Avoid underinsurance penalties and margin clause restrictions
Ensure you’re not overpaying for unnecessary coverage
Confidently select the right policy structure for your business
