Master Policy
What Does Master Policy Mean?
A master policy is an insurance contract issued to a policyholder that consolidates multiple separate policies into one. Instead of issuing individual policies for each location or operation, a master policy combines them into a single policy. There are several situations in which a master policy may be used.
For business owners or employers, a master policy can be purchased to provide insurance coverage for other individuals, typically their employees. This is common with commercial general liability policies that extend coverage to employees.
Master policies can also be used to provide coverage for subsidiaries, subcontractors, or other parties whom the insured has voluntarily agreed to insure under the policy.
Holders of master policies can issue certificates of insurance for other insured parties under the policy, which can serve as evidence of coverage.
Insuranceopedia Explains Master Policy
Master policies consolidate multiple policies into one unified insurance policy, simplifying administration for both individuals and businesses. Although those insured through a master policy are not considered parties to the contract, they benefit from its coverage. The policyholder can issue certificates of insurance for the beneficiaries, which they can use as proof of coverage.
A master policy may be used for group insurance policies, such as group health or group life insurance. It outlines eligibility criteria for coverage, such as the length of employment, ensuring that employers make objective decisions about who to enroll in the policy.
Another scenario where a master policy is useful is when unifying coverage for several business locations or properties under one policy. Businesses with multiple locations often prefer a master policy listing all locations, rather than arranging separate insurance for each.
By bundling insurance under one policy with a single insurer, businesses simplify administration (avoiding the complexity of multiple policies with different expiration dates) and can potentially save money by consolidating larger volumes with the same insurer. Homeowners or property investors also use master policies to insure multiple properties in their portfolios.
A common use case for master policies is with large businesses that have numerous operations and subsidiaries. The complexity of these businesses makes them difficult to insure under a typical standalone policy. Administering multiple standalone policies can be cumbersome. A master policy addresses this challenge by providing comprehensive coverage at a reasonable rate while streamlining the management of fewer policies.
