Distribution Clause

What Does Distribution Clause Mean?

A distribution clause is a provision in a property insurance policy that allocates coverage across two or more properties by assigning a specific percentage to each. This is commonly used when the properties are in different locations.

Insuranceopedia Explains Distribution Clause

Suppose Mr. X owns three buildings: one on Street A, one on Street B, and one on Street C. The building on Street A is the most valuable, followed by the building on Street B, with the building on Street C being the least valuable.

With a distribution clause in his property insurance, coverage could be allocated as follows: 50% for the building on Street A, 30% for the building on Street B, and the remaining 20% for the building on Street C.

Given a total insurance limit of $1,000,000, this distribution means the building on Street A would receive up to $500,000 in coverage for losses, while the buildings on Street B and Street C would receive $300,000 and $200,000, respectively.