What Is Blanket Insurance?

First, when I say blanket insurance, I’m not talking about insurance on a comforter, throw, or quilt, although technically, blanket insurance could be applied to those things…. Confused?  Let me try to clear things up here.

What I’m talking about is insurance on your business personal property, structures, and buildings…. And even loss of business income if those things become damaged.

There are basically two ways to insure things:

1. Individually
2. Blanket

Insuring something individually goes like this: you own three buildings, each one with a reconstruction cost of $1,000,000.  You have one policy that insures each of those three buildings.  Each building is listed (or scheduled) on the policy each with a limit of $1,000,000.  If a fire burns down one (or all) of your building(s), your policy will pay up to a $1,000,000 for each buildings.

Blanketing goes like this: you own three buildings, each one with a reconstruction cost of $1,000,000.  You have one policy that insures each of those three buildings.  Each building is listed on the policy but there is no individual limit for each building.  There is, however, later on down the page, a total reconstruction limit of $3,000,000 that covers all buildings listed.

What’s the difference?

The difference is that in the first example, each building was subject to a limit of $1,000,000.  In the second example, the building was not subject to an individual limit, but rather all three buildings were subject to a total of $3,000,000.  Envision it this way.  Individual: three pots of money, each worth $1,000,000 available if needed.  Blanket: one big pot of money worth $3,000,000 available if needed.

Why does it matter?

Simply put, because determining the reconstruction cost of anything is difficult and conditions change.  Yes, you just had the buildings built and are certain that it would cost $1,000,000 each to rebuild.  But what if you add an elevator, a fountain, and marble flooring in the lobby, and for $100,000 and forget to tell your insurance agent?  (Yes, it happens: people forget to tell their insurance agent these kinds of things).  Or, what if the cost of construction materials increases?  So let’s say one of the buildings burns down, and the actual cost to rebuild it $1,200,000.  If you insured the buildings individually, you would have to come up with $200,000 out of your own pocket to make up the difference.  If you blanketed the buildings, you would be covered because you have the full $3,000,000 at your disposal.

Advantage: blanket!

That’s how it works.  It’s that simple!  Well, almost that simple.  There are other factors at play, such as deductibles and  co-insurance that could/would affect the total payout, but as far as blanketing goes, that’s how it works.  And again it doesn’t have to be buildings.  You can blanket, equipment, structures, business personal property, inventory, and more.  In fact, you may have a policy right now that blankets items and you didn’t realize it!  Most policies have some sort of blanket coverage on certain items.

Has anyone experienced an insurance loss that utilized a blanket in order to get the full replacement value?