Insuring multiple homes can be a challenge for some families, particularly when those residences are spread among several states. Assuming different insurers on the properties, there may be a hodgepodge of coverage forms, each with unique policy terms, conditions and limits.
Some families have been able to meet this challenge with a family blanket policy. Such policies essentially replace multiple property insurance policies with one document featuring a single financial limit covering all residences.
The idea of this insurance approach derived from commercial property insurance, where a large business insured multiple locations it owned or leased via a single policy. Now some personal lines carriers are essentially offering the same type of coverage to their customers.
While this approach certainly reduces the nagging confusion caused by several different policies, there are caveats to consider. Chief among them is that two (or more) residences in close proximity to each other generally are not good candidates for this insurance approach. The reason is that insurers actuarially seek a significant spread of geographic risk when underwriting blanket policies, which is narrowed by having two homes subject to the same loss event, such as a hurricane or wildfire.
Spread of Geographic Risk
This factor became clearer following a recent discussion with Timothy O’Brien, private client practice leader at insurance brokerage Cook Maran & Associates. Tim pointed out that a single hurricane could damage both a house in the Hamptons and another on the shore in Connecticut. “But if you have one home in the Hamptons, another in the Rockies and another in Florida, the spread of risk is such that no single event could cause damage to them all at the same time,” Tim said. “Barring, of course, a giant asteroid hitting the planet,” he added.
We spoke right after a blazing meteor exploded above Russia, I should point out.
Despite the growing popularity of blanket property policies, there are other drawbacks to consider, and many personal lines carriers are rightfully wary of these complex arrangements. There can be complications when a family office combines family members under one policy. For example, has enough coverage been purchased to adequately cover each family member? If not, how will the limit be divided and at what percentages? And how can the premium each pays be appropriately allocated?