Block Policy

A block policy is an all risk insurance policy providing coverage against risks faced by goods transported or stored by third parties. Commonly found in commercial insurance, a block policy is designed to protect businesses from property damage.

Most companies will purchase property insurance. This type of insurance provides protection for buildings, equipment, and inventory. However, once stock leaves the premises, property coverage no longer insures it. To further protect goods shipped from business to customer, there is a need for inland marine insurance, also known as a block policy.

While it seems that inland marine insurance would only apply to boats and other watercraft, this type of policy is useful whenever goods are transported, including by rail, river, or road. It also covers property in storage and the equipment required to make the transportation and storage of goods possible. Companies wanting their products covered against a wide variety or perils during transport and storage may buy a type of inland marine insurance or block coverage.

A block policy provides coverage against risks businesses face when they contract out transportation and storage of stock goods. Block coverage is bought most often by manufacturers, wholesalers, and companies that ship product to their customers, because goods are out of the direct company control during shipment.

Two of the most common kind of block policies are furriers' block policies and jewelers' block policies. These two block policies were developed in the 19th century to protect businesses from theft, since both furs and jewels were high-value commodities and likely targets for burglars. Jewelers' policy covers companies that sell jewelry. Furriers' policies cover those businesses selling furs.  

Because the insured items are more expensive, block policies are more likely to require that the items be stored in secure buildings and transported via protected vehicles. Insurers are less likely to underwrite furriers' block policies, since furs are expensive and more susceptible to damage. 

Block policies complement coverage provided by commercial property insurance. Property insurance will cover against inventory loss while goods are in possession of the policyholder. Block policies cover against loss when goods are in possession of a third party. 

Block policy coverage is considered an all risks policy, meaning it covers the policyholder against all risks unless the insurer creates exclusions.

Because a block policy is an all risks policy, it may cover for perils that do not directly concern a business. As a result, the insured may pay a higher premium than if they had purchased a more specific hazard policy. Companies that transport cargo may also buy freight insurance, which makes manufacturers' block policy unnecessary.