Does a Blanket Property Policy Fully Cover Each Building?
A blanket property policy can cover several buildings under one shared limit.
But a large blanket limit does not mean every building is fully covered.
A location limit, margin clause or co-insurance rule can affect how much you get paid after a loss.
How does a blanket property policy work?
A blanket limit is one amount that can apply to several buildings or types of property.
For example, five buildings might share a CAD 100 million blanket limit.
If one building has a CAD 30 million covered loss, the loss is below the blanket limit.
But that does not mean the policy will always pay the full CAD 30 million.
Other limits and rules in the policy can also affect the payment.
The blanket limit is only one part of the policy.
Does a claim reduce the blanket limit?
Do not assume that a claim either reduces or does not reduce the amount available for the rest of the policy year.
That depends on the policy wording.
Your policy may also have separate limits for certain buildings or types of property.
The declarations and endorsements show how the blanket limit works and whether other limits apply.
How can a margin clause limit a claim?
A margin clause can set a maximum payment for one building based on the value reported for that building.
For example:
Amount | |
|---|---|
Blanket limit | CAD 200 million |
Reported value of building | CAD 40 million |
Margin | 110% |
Location limit | CAD 44 million |
Replacement cost | CAD 60 million |
The location limit is:
CAD 40 million × 110% = CAD 44 million
If the building is destroyed and costs CAD 60 million to rebuild, there is a:
CAD 60 million − CAD 44 million = CAD 16 million gap
You would have to fund that CAD 16 million yourself, before the deductible and other policy rules.
The policy has a CAD 200 million blanket limit, but that does not mean the full CAD 200 million is available for this one building.
If the building had been reported at CAD 60 million, the same 110% margin would produce a CAD 66 million location limit.
The value reported for each building matters.
What about co-insurance?
Co-insurance works differently.
A co-insurance rule compares the amount of insurance you have with the amount your policy says you should have.
If you have less than the required amount, the payment on a covered loss can be reduced.
A margin clause can set a maximum payment for one building.
Co-insurance can reduce a payment when you do not carry enough insurance.
A policy can have both. Both can affect the same loss, depending on the policy wording.
See how co-insurance works and how a margin clause can limit a claim.
Why does the value of each building matter?
Your statement of values lists the values reported for your buildings.
Those numbers can affect how your policy responds to a loss.
If the values come from an old valuation, a rough estimate or an old value increased by general inflation, they may no longer match the buildings’ replacement cost.
That can create problems with margin clauses, co-insurance and other policy rules.
What should you check?
Before your next renewal, ask:
What is the blanket limit?
Does each building have a separate limit or cap?
Is there a margin clause?
What value is reported for each building?
When was each value last reviewed?
Does the policy have a co-insurance requirement?
A current replacement cost valuation can help you review the values reported for each building.
How Remit helps
Remit prepares independent insurance replacement cost valuations for commercial buildings.
We look at each building’s actual characteristics and current construction costs to develop its replacement cost value.
Send us the property addresses to discuss a valuation and how to keep the values current.
This article is for general informational purposes only. Policy wording varies and determines coverage and claim payments.
