What Does Monoline Policy Mean?
A monoline policy is an insurance policy that covers only one specific risk. An example of a monoline policy would be a single auto insurance policy covering only one vehicle.
Within the industry, some brokers and agents may consider clients with only one type of insurance policy with their company as a monoline client. Therefore, if a client has placed their vehicle insurance with the broker but not their home insurance, they would be considered a monoline client.
In some circumstances, an insurance company may only be able to provide a monoline policy, depending on the types of risk they cover. For example, an auto insurance company may provide a monoline policy for classic, collectible vehicles. This vehicle would be placed on a stand-alone policy because the standard auto policy may not have the specialized coverage required for the unique nature of a classic or collectible car. Standard auto policies usually do not include coverage for extra parts or upgrades, whereas classic car policies insure the vehicle based on appraisal value, including upgraded parts.
A monoline policy is also known as monoline insurance.
Insuranceopedia Explains Monoline Policy
Packaging policies together (such as home, auto, liability, boat, etc.) may provide discounts with the insurance company for placing all of that business with them. This is known as a multi-line policy. The surface reason for this benefit is loyalty to the company. 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 — the more data points, the more accurately an outcome can be predicted.
If an insurance company covers all of a family’s vehicles and properties, the company can use that information to assess the probability of the client making a claim much more accurately than if all the properties and vehicles were spread across different companies. If someone gets into many accidents with their vehicles, the insurance company may have a good idea of the risk of getting into a motorcycle accident as well. While this may sound negative to the buyer, it is offset by premium discounts, coverage allowances and sometimes exceptions to policy clauses that benefit the client for the sake of loyalty.
Monoline policies come in where multi-line policies may be undesirable or simply not possible. If a property or vehicle is considered undesirable or not standard in some way, it may not be possible to place it on a policy with others the insured owns. For instance, a monoline policy for homeowners insurance may only include coverage for liability, but not for the property itself because it is in a high-risk area or has not been upgraded. Examples include old, off-grid cabins, houses with old pipes or electrical, or properties far from fire stations.
Purchasing a monoline policy usually means dealing with a broker or agent who specializes in that risk, and that may mean more direct contact (and potentially less time holding on the phone). It can also cost less compared to bundled policies. Asking a broker or agent to quote the policies separately and together can help ensure getting the best value for insurance premiums.