You probably remember the concept of blanket insurance as explained in the property section of your licensing course. Things have progressed a bit since then, and we need to take another look at how this idea plays out in today's world of commercial insurance. This discussion does not apply to BOPs as blanket coverage is not available under such policies.

First, let's review the basics. Assume your client, Dan's Delicious Dining, owns three restaurants in Minneapolis and owns the buildings in which each is located. Building A has a replacement cost of $1 million, Building B's is $2 million, and Building C's is $3 million. If the policy is written that way with those amounts of insurance (known as “specific insurance”), and Building B was totally destroyed, the most the carrier would pay for the damage would be $2 million. If it turned out that the actual cost to replace was $2.4 million, the insured would be out of pocket $400,000.

If, on the other hand, you write the coverage for $6 million blanket over all three buildings, any loss up to $6 million will be covered. Building B's total destruction will result in the carrier paying the entire replacement cost of $2.4 million.

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