What it means
Many businesses own several kinds of property and face several kinds of risk. A jeweller, for example, holds stock in the shop, in transit, at exhibitions and with customers.
Insuring each of these separately would be costly and could leave gaps. A block policy treats the whole stock as one "block" and covers it against listed perils (causes of loss) such as theft, fire, damage and loss in transit.
The insured value is a single figure, and the policy follows the property wherever it goes within the stated territory. This is why it is also known as an all-risks or blanket policy in some markets.
The main benefit is convenience and continuity. There is one premium, one renewal and one claims process, and goods are covered when moving between locations.
The policy often includes sub-limits, which are caps on certain items or situations, such as a limit on any single item or on cover while goods are held by a customer. Insurers set conditions to manage the risk.
They may require approved safes, alarms and security procedures, and they may exclude losses caused by unexplained disappearance or staff dishonesty unless specially included. Policyholders must read the exclusions closely, because failing to follow a security condition can lead to a claim being refused.
Premiums are normally based on the sum insured and the business's claims history, risk controls and trade. A block policy can be cheaper than the sum of separate policies, because the insurer deals with one contract and a spread of risks.
The sum insured should be reviewed regularly, as stock values change through the year. Brokers also help by negotiating the wording, because small differences can decide a claim.
Questions to ask include whether goods held by customers are covered, whether cover applies at trade shows and whether there is a limit on any single item.
In practice
Real-world examples.
Example
A watch retailer holds $1.5 million of stock in a shop, takes samples to trade fairs and sends repairs by courier. A block policy covers all three situations under one premium. When a courier parcel is lost, the claim is paid under the same policy without a dispute over which cover applies.
Example
A professional photographer owns cameras, lenses and lighting worth $90,000 and works in many locations. Her block policy covers the equipment anywhere in the country, including in her car and on location. She pays a single annual premium and keeps a list of serial numbers for claims. When a lens is stolen from her car, the claim is paid within three weeks.
Example
An art dealer insures a changing stock of paintings valued at about $3 million. The policy allows for temporary increases when large exhibitions take place. The dealer informs the broker of each change, so that the cover keeps pace with the real value. A short monthly stock report keeps the records accurate.
Formula
Calculation
Premium = Sum insured x Premium rate
A jeweller insures a stock block of $2,000,000 under a block policy at a rate of 0.8%. Premium = 2,000,000 x 0.008 = $16,000. If the jeweller had bought separate policies for stock in the shop, in transit and at exhibitions with a combined cost of $19,500, the block policy would save 19,500 - 16,000 = $3,500 a year.Case study
Seen in the real world.
Silverline Jewellers is a fictional retailer that used four separate policies for shop stock, transit, exhibitions and customer repairs. When a package of repaired rings went missing, the transit insurer and the shop insurer each argued that the other should pay. The claim took five months to resolve.
In this illustrative story, the owner moved to a single block policy with a $1,800,000 sum insured and clear wording on goods held for repair. The premium fell by about 12% and claims were handled by a single insurer. The owner also set a quarterly reminder to update the stock value, so that the business would never be underinsured.
The insurer visited the shop and recommended a better safe and a monitored alarm. Meeting those conditions earned a further discount at the next renewal.
Watch out
Common mistakes.
- Assuming a block policy covers everything. Exclusions and sub-limits still apply, and security conditions must be followed.
- Under-declaring the value of stock to save premium. In a claim, the insurer may reduce the payout in proportion.
- Forgetting to update the sum insured. Stock values change, and cover that was right in January may be too low by December.
Questions
People also ask.
What types of business buy block policies?
Jewellers, camera and electronics dealers, art galleries, furriers and other businesses holding valuable portable stock.
Is a block policy the same as a package policy?
They are similar, but a block policy is usually built around valuable movable goods, while a package policy bundles different covers for a general business.
How is a claim handled?
The policyholder reports the loss, supplies evidence such as stock records and police reports, and the insurer assesses the claim against the policy conditions.
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