Segregation Of Exposure Units

What Does Segregation Of Exposure Units Mean?

The segregation of exposure units refers to the process of literally separating items that pose risks to the insured into two distinct areas. For example, a company might store assets in two different banks to minimize the risk of losing all of its assets if one of the banks is robbed. Even with assets split between locations, businesses still buy commercial crime insurance to cover theft, fraud, and employee dishonesty at each site. Essentially, segregation of exposure serves as a strategy to hedge against risk.

Insuranceopedia Explains Segregation Of Exposure Units

Segregation of exposure units is a risk management strategy that insurance companies may recommend to policyholders to reduce the likelihood of total losses. This practice benefits both the policyholder and the insurance companies, as losses are undesirable for both parties.

This strategy is applied to protect a wide variety of assets and operations. When property is split across multiple sites, owners sometimes pair it with blanket insurance to cover the combined value under a single policy instead of writing separate coverage for each location.