Blanket examples

Example: Blanket in a Commercial Property policy

A Commercial Property policy covers two buildings, 123 Main Street and 456 Market Street. The policy has the following coverages:
  • 123 Main Street, Building: $1,000,000
  • 123 Main Street, Personal Property: $500,000
  • 456 Market Street, Building: $2,000,000
  • 456 Market Street, Personal Property: $500,000
  • Combined Blanket Limit: $4,000,000

If 123 Main Street suffered a total loss due to fire, with a specific limit policy (not a blanket policy), the insured party would have $1,000,000 in Building coverage and $500,000 in Personal Property coverage available to them to cover the fire damage. With a Building and Personal Property blanket policy, they would have up to $4,000,000 limit to replace or repair the building and/or personal property.

If there were a loss on both buildings, with a blanket policy, the insured party would have up to $4,000,000 limit available to allocate between both locations.

Example: Direct and time blankets

You can have blankets over coverages such as Building Coverage, Business Personal Property (BPP), and Business Income.

You can have blankets over coverages on building risks. These coverages typically include:
  • Building Coverage
  • Business Personal Property (BPP)
  • Business Income (loss of use)
Note that in Commercial Property policies the word "Building" refers to both a physical risk object and a coverage on the risk object.

Insured values for a manufacturer

Consider the case where the insured party is a manufacturer and distributor with two locations:
  • Location 1 has two buildings, a warehouse (Location 1, Building 1) and a manufacturing facility (Location 1, Building 2).
  • Location 2 has one building, a rented secondary warehouse (Location 2, Building 1).
The following table gives the insured values for the different coverages. Location 2, Building 1 does not have building coverage because it is rented. The building coverages for that building are provided under the landlord's fire policy.
Table 1. Insured values for coverages
Risk object Coverage Value
Location 1, Building 1 Building 6,000,000
Location 1, Building 1 BPP 1,000,000
Location 1, Building 2 Building 5,000,000
Location 1, Building 2 BPP 25,000,000
Location 2, Building 1 BPP 8,000,000
Location 2, Building 1 Business Income/Extra Expense 12,000,000

Blanket for direct damage

You can have a blanket for direct damage, meaning a loss resulting from damage to physical property, buildings, and BPP.
Table 2. Direct blanket
Risk object/blanket Coverage Value
Location 1, Building 1 Building 6,000,000
Location 1, Building 1 BPP 1,000,000
Location 1, Building 2 Building 5,000,000
Location 1, Building 2 BPP 25,000,000
Location 2, Building 1 BPP 8,000,000
Direct blanket Building and BPP (aggregate) 45,000,000

Blanket for time element

You can also have a blanket for time element, or the loss of income resulting from not being able to sell products due to loss of property. This type of loss includes:
  • Cost to rent another location
  • Payroll cost to remake goods
  • Cost to replace goods held for sale
  • Cost for time during which goods cannot be made or sold
Table 3. Time blanket
Risk object/blanket Coverage Value
Location 1, Building 1 Business Income with extra expense 5,000,000
Location 1, Building 2 Business Income with extra expense 3,000,000
Location 2, Building 1 Business Income with extra expense 13,000,000
Time blanket Business Income with extra expense (aggregate) 21,000,000

Coinsurance and blankets

One benefit of blanket insurance is that the insured party can reduce their total insured value, saving premium, based on the coinsurance selected. Typical coinsurance options are 80%, 90%, and 100%. For example, with 80% coinsurance the total blanket limits in this example are as follows:
  • Direct blanket: 45,000,000 * 80% = 36,000,000
  • Time blanket: 21,000,000 * 80% = 16,800,000
The insured party is responsible for the uncovered portion of the loss.