Monoline Policy
What Does Monoline Policy Mean?
A monoline policy is an insurance policy that covers only one specific risk. For example, a single auto insurance policy that covers only one vehicle is a monoline policy.
In the insurance industry, brokers and agents may refer to clients with only one type of insurance policy with their company as monoline clients. For instance, if a client has their vehicle insurance with the broker but not their home insurance, they would be considered a monoline client.
In some cases, an insurance company may only be able to offer a monoline policy, depending on the types of risks they cover. For example, an auto insurance company may provide a monoline policy for classic or collectible vehicles. These vehicles would be placed on a stand-alone policy because standard auto policies may not provide the specialized coverage needed for such unique cars. While standard auto policies usually don’t cover extra parts or upgrades, classic car policies insure the vehicle based on its appraisal value, including any upgrades.
A monoline policy is also known as monoline insurance.
Insuranceopedia Explains Monoline Policy
Packaging policies together, such as home, auto, liability, boat insurance, etc., is known as a multi-line policy. This arrangement often provides discounts from the insurance company for consolidating all of a client’s business with them. The primary reason for these benefits is customer loyalty. However, the insurance company also benefits by being better able to predict the insured’s level of risk. This works on the same principle as the law of large numbers—more data points help predict outcomes more accurately.
When an insurance company covers all of a family’s vehicles and properties, it can more accurately assess the likelihood of a claim than if those properties and vehicles were spread across multiple companies. For example, if someone frequently gets into accidents with their vehicles, the insurance company might predict a higher risk of accidents with other vehicles, like a motorcycle. While this might seem like a negative to the buyer, the benefits are often offset by premium discounts, coverage allowances, and sometimes exceptions to policy clauses that favor the client due to their loyalty.
Monoline policies come into play when multi-line policies are undesirable or not feasible. If a property or vehicle is considered non-standard or high-risk, it may not be possible to include it in a multi-line policy with other assets. For example, a monoline homeowner’s insurance policy might only cover liability but not the property itself if the property is in a high-risk area or has outdated features, such as old pipes, and electrical systems, or is located far from fire stations.
Choosing a monoline policy often means working with a broker or agent who specializes in that specific risk, which can lead to more personalized service and potentially less time spent on the phone. It can also be less expensive than bundled policies. Asking a broker or agent to quote policies both separately and together can help ensure the best value for insurance premiums.
