Guides
Agreed value, blanket limits and margin clauses
How agreed value suspends coinsurance, how a blanket limit spreads one limit across locations, and how a margin clause caps the payment at each building.
Agreed value switches off the coinsurance penalty for a stated period, as long as your limit matches the value you and the insurer agreed on. A blanket limit puts several buildings or contents groups under one shared limit instead of a separate limit for each. A margin clause is an endorsement that caps what a blanket policy pays at any one location at a percentage of the value listed for it, usually just above 100%. The first two features are valuable, and the third can take back a good part of what they give you.
Scheduled limits vs blanket limits
On a scheduled (specific) basis, every building and every contents group has its own limit, and coinsurance is tested item by item. If Building 3 has a $1.1 million limit and costs $1.35 million to rebuild, that building is short, and nothing from the other locations makes up the difference.
On a blanket basis, one limit applies to two or more items. The ISO Building and Personal Property form (CP 00 10 10 12) says the coinsurance condition then applies to the total of all property under that limit, not to each building. The practical benefit is that an undervalued building can borrow from an overvalued one, and a single total loss is not capped by the building's own line on the schedule. That is why blanket limits are popular with owners who have several locations. The rate is an average applied to the combined value.
The costs: the insurer wants a statement of values for every location (see the statement of values: what property underwriters need), blanket policies are typically written at 90% or 100% coinsurance (a January 2022 Rough Notes column reports that ISO's manual rules call for one of those two), and in one event the blanket limit is the most that is paid, however many locations are damaged. A lender may also insist on a specific limit for its building.
How agreed value works
Agreed Value is an optional coverage in CP 00 10 (Optional Coverages, paragraph G.1) and in the business income form. In the property form it works like this:
- The coinsurance condition does not apply to the property for which Agreed Value is shown.
- The insurer will pay no more than the proportion that your limit bears to the agreed value in the declarations. If your limit is at least the agreed value, a covered loss is paid in full up to the limit, with no coinsurance reduction. If your limit is lower, the payment is reduced in proportion.
- The coverage has an expiration date in the declarations. If the date is not extended, coinsurance returns and the optional coverage ends.
- It applies only to losses that occur after the effective date and before the earlier of the agreed value expiration date and the policy expiration date.
To get it, you submit a statement of values to support the figure. The insurer is accepting your number for the period, so the number should be defensible: a recent appraisal, a valuation report or a contractor's estimate. See insurance to value: setting the right building limit.
Agreed value on business income
The business income form (CP 00 30 10 12) has its own Agreed Value option. You submit a Business Income Report/Work Sheet showing the financial data for the 12 months before the date of the worksheet and an estimate for the next 12 months. The agreed value should be at least the coinsurance percentage times the net income and operating expenses you report for those next 12 months. Coinsurance is suspended until 12 months after the effective date or the policy expiration, whichever is first, and it is reinstated automatically if you do not submit a new worksheet within 12 months or when you ask to change the limit. If the limit is lower than the agreed value, the form reduces payment by that ratio. For example (hypothetical), with a $150,000 limit, a $200,000 agreed value and a $60,000 loss, the ratio is 0.75 and the payment is $45,000. how to calculate a business income limit covers how to build the figure.
The margin clause
A margin clause is the reason "blanket plus agreed value" is not the whole story. The ISO endorsement is CP 12 32, Limitation on Loss Settlement - Blanket Insurance (Margin Clause). It sets a maximum payable at each location, equal to the value shown for that location on the statement of values times a stated percentage. The percentage is commonly 110% or 125%, though ISO's rating rules provide factors at 105%, 110%, 120% and 130%, and carriers often use their own wording or build the clause into the coverage form. It does not raise the blanket limit. The loss is calculated first under the usual terms, and the margin clause then caps the result.
A margin clause can defeat agreed value: an Agreed Value policy with no coinsurance still pays no more than the cap. Mike Edwards, in a Big "I" Virtual University article for independent agents, gives an example in which the statement of values lists a building at $1 million and the margin is 115%. Coinsurance is suspended by agreed value, yet a $1.3 million loss pays only the $1.15 million cap. Bill Wilson's September 7, 2026 column in Insurance Journal makes a related practical point: do not tell business partners such as a landlord or lender that you have full blanket coverage without checking for a margin clause.
A worked example (hypothetical)
A four-location retailer lists these values on its statement of values: $600,000, $900,000, $1.1 million and $1.4 million, a total of $4.0 million. Location 3 actually costs $1.35 million to rebuild. The deductible is $10,000, and coinsurance is 90% where it applies. A fire destroys Location 3. The table compares three ways of writing the same account, assuming each is written at replacement cost.
| Structure | Cap or limit for Location 3 | Total-loss payment | Partial loss of $200,000 |
|---|---|---|---|
| Scheduled, $1.1 million limit, 90% coinsurance | $1,100,000 | $1,100,000 (the limit) | $171,070 (ratio 0.905 applied, less deductible) |
| Blanket $4.0 million, agreed value, no margin clause | None below the blanket limit | $1,340,000 | $190,000 |
| Blanket $4.0 million, agreed value, 110% margin clause | $1,210,000 (110% x $1.1 million) | $1,210,000 | $190,000 |
Two lessons come out of it. Blanket with agreed value pays the full loss when values are off, which is why owners like it. And the margin clause costs the owner $130,000 on the total loss because Location 3 was listed $250,000 below its real cost, while the partial loss is unaffected. A margin clause rarely matters until a big loss at an under-listed building, which is exactly when the owner needs the money.
Business income without coinsurance
Business income cover has two other ways to avoid coinsurance, both in CP 00 30. Under Maximum Period of Indemnity the insurer pays the lesser of the loss in the 120 days after the period of restoration begins or the limit. Under Monthly Limit of Indemnity the most paid in each 30 consecutive days is the limit times a fraction shown in the declarations (for example, 1/4 of a $120,000 limit is $30,000 a month). Neither requires coinsurance, and both put a ceiling on how much you recover in a given period. They suit businesses with predictable, steady earnings and a short expected recovery; they do not suit a business that would need a long rebuild. See business interruption insurance: how business income coverage works.
What to negotiate and check
- Ask whether the quote includes a margin clause, in the form or in an endorsement, and at what percentage. Request a higher percentage or its removal.
- Confirm that blanket and agreed value are both shown in the declarations, with an expiration date for agreed value you can diary.
- Keep the statement of values current. Put the date, the method (appraisal, cost estimator) and who signed it in the file.
- Check coinsurance on any items not under the blanket, and on business income.
- Revisit the arrangement after renovations or acquisitions; a new building is a new line on the schedule.
For the arithmetic behind coinsurance, see the coinsurance clause and how underinsurance is penalized and use the coinsurance penalty calculator. commercial property insurance: what it covers and what it doesn't shows how these features fit with the rest of the policy.
Key takeaways
- Agreed value suspends coinsurance for the period shown in the declarations, but it expires; diary the date and refresh the values before it does.
- A blanket limit shares one amount across items and tests coinsurance on the combined value, which forgives an error at one location if others are insured above value.
- A margin clause caps the payment at each location at a percentage of its listed value, so an undervalued building can still be short even on a "blanket agreed value" policy.
- Business income has alternatives to coinsurance: agreed value with a worksheet, a maximum period of indemnity, or a monthly limit of indemnity.
- Accurate, documented values are the common remedy for every one of these problems.