Legal Definitions - compound policy

A compound policy, often referred to as a blanket policy, is a single insurance contract that provides coverage for multiple distinct items, properties, or risks under one overall sum insured. Instead of assigning a specific, separate amount of coverage to each individual asset or location, this type of policy allows the total coverage amount to be applied flexibly across all the covered assets in the event of a loss, up to the policy's maximum limit.

Here are some examples to illustrate this concept:

• Business Property Coverage: Imagine a small manufacturing business that owns its main production facility, a separate storage warehouse across town, and a small administrative office building. Instead of purchasing three individual property insurance policies—one for each location—the business opts for a compound policy. This single policy provides a total sum insured that covers all three properties for perils like fire or natural disaster. If a fire damages both the production facility and the warehouse in the same event, the business can claim against the single, overarching policy limit for the combined damage, rather than being restricted by separate, smaller limits for each structure.

• Homeowner's Policy for Multiple Structures: A homeowner has a primary residence, a detached garage, and a separate garden shed on their property. They purchase a compound homeowner's insurance policy that covers all three structures, along with their personal belongings, under one comprehensive coverage amount. If a severe storm damages both the main house and the detached garage, the homeowner can access the overall policy limit to cover the combined repair costs for both structures, providing flexibility in how the coverage is utilized across the different parts of their property.

• Municipal Asset Protection: A city government needs to insure its various public assets, including the city hall, several public libraries, multiple fire stations, and various community centers. Rather than securing dozens of individual policies for each building, the city purchases a compound policy. This single policy provides a total sum insured that covers all these municipal properties against specified risks. If an earthquake damages several libraries and a fire station simultaneously, the city can draw from the single, large policy limit to cover the collective losses across all affected facilities, simplifying their insurance management and claims process.