12 BULLETIN 530, U. S. DEPARTMENT OF AGRICULTURE. 



the total amount of thje two or more policies shall b(d well within the 

 actual value of the property. 



The second plan of sharing liability with other companies is that 

 of reinsurance. Under this plan the original company in the first 

 place insures the entire risk, but later makes a contract with another 

 insurance company to assume a certain part of the liability. 



The first of these two plans is the more easily applied, since the 

 two or more companies sharing a given risk are practically inde- 

 pendent of one another ; hence uniformity in practice or approval of 

 one another's methods is not required. Under the second plan the 

 knowledge and approval of one another's methods and affairs are 

 necessary before an agreement for reinsurance can be brought about. 



EVILS OF BLANKET INSURANCE. 



From the point of view of the company the insurance written 

 should be as specific as possible. The practice of writing blanket 

 insurance, that is, of covering a variety of insurable objects by a 

 single lump sum of insurance, is unfair both to the company and to 

 the members with a small amount of property to insure. It enables a 

 member owning a large amount of property to protect himself 

 against loss with a relatively small amount of insurance. In extreme 

 instances all the personal property located on several separate farms 

 has been thus covered by a single sum of insurance. Since loss of 

 more than a small fraction of this property by any one fire is impos- 

 sible the owner, under such a blanket plan, can protect all his per- 

 sonal property by an amount of insurance equal perhaps to 10 or at 

 most 20 per cent of the value. A corresponding opportunity to 

 secure more protection than is actually paid for is not open to the 

 member who has but few items of personal property and these in a 

 large measure subject to destruction by a single fire. 



Inasmuch as under the blanket plan the property covered by the 

 insurance is invariably out of proportion to the amount of insurance 

 written, it makes the assessment per hundred of insurance unduly 

 large, and thus in addition to giving an unfair advantage to the more 

 wealthy members, it discredits the work of the company by making 

 the average cost of protection appear higher than is actually the case. 

 A number of the farmers' mutuals have reduced their rate of assess- 

 ment materially, while at the same time they have made their assess- 

 ments more just, by the simple method of changing their plan from 

 one of giving blanket insurance to one of specific enumeration and 

 valuation of the various kinds of property covered by the contract. 



