How Does Blanket Insurance Differ From Scheduled Insurance?

How Does Blanket Insurance Differ From Scheduled Insurance?

Question:  How Does Blanket Insurance Differ From Scheduled Insurance?

Answer: The term “Blanket” can mean a number of things in insurance, but it usually means that a single limit applies to a type or types of covered property.

Example One: Real And Personal Property

Suppose your business owned two buildings. Building one has an estimated replacement cost of $500,000 and has $500,000 in contents in it. Building two has an estimated replacement cost of $250,000 and has $250,000 in contents in it.

If you were buying specific, or scheduled, limits, you would purchase the four individual limits of insurance shown above.  Your insurer might offer you the option of purchasing a blanket limit of $1,500,000 for building and personal property insurance across the two locations.  The blanket gives you an added level of protection in case the actual replacement cost ends up being a bit higher than you estimated at one of the buildings and can also be helpful if contents might move from one location to another periodically.

Example Two: Miscellaneous Tools

Your business might have a variety of tools that you use at various jobsites.   As it can be cumbersome to schedule each tool individually on an inland marine floater, your insurance company might allow you to purchase a blanket limit for tools with a replacement cost below a certain threshold.  If you owned $50,000 worth of tools that each had a replacement value of $2,500 or less, your insurer might write an insurance policy providing a blanket limit of $50,000 on tools and restrict the coverage to apply only to items with a replacement cost of $2,500 or less.  You would then need to specifically schedule any item with a value of more than $2,500 on your marine insurance policy.

Example Three:  Fine Arts

Often times a homeowner will own a variety of fine arts where no single item is worth a lot of money.   Rather than requiring you to specifically describe and schedule each piece of art and provide an appraisal on each piece, many insurers will offer a blanket limit on lower valued items.  For example, you might be able to purchase $15,000 of fine arts coverage on a blanket basis, applying to all your art.  The blanket limit may or may not have a sub-limit per item.  For example, the limit might read:  $15,000 blanket limit for fine arts with a sub-limit of $2,500 for any one work of art.  If this were the case, you would need to specifically schedule any item worth more than $2,500 on the policy in order to be properly covered.

Blanket limits usually give the insured more flexibility at loss time.   Because blanket coverage is generally favorable to insureds, the rate per $100 of insured values is generally higher.   On real and personal property, the rate is generally about 3 to 10 percent higher.   On tools, fine arts, and other inland marine classes of business, the blanket rate can be significantly higher than the scheduled rate.   For example, a rate per $100 of value on scheduled tools might be one half or one third the rate charged on unscheduled tools.

Talk to your professional insurance agent about blanket insurance to see if it is right for you given your specific situation.

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Jim Ketterson is an insurance expert with more than 25 years of experience in the industry. He has served as a President of an insurance company, an insurance underwriter, and has held various roles in insurance company product management. He has his Chartered Property Casualty Underwriter designation and a MBA in Finance. The information he offers in his posts is general in nature and may not be appropriate, accurate, or applicable in all situations. Before making any important insurance decisions, you should seek the advice of a qualified insurance agent and discuss the particulars of your individual situation. Follow Jim on Twitter @MNinsurancePro

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