What is a commercial package insurance policy?

15.06.2020
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Introduction

Commercial package policy commonly known as a CPP is an insurance policy that is designed to protect a business from various types of commercial risks. It combines coverage for multiple risks, such as liability and property risk in a single policy. Under a CPP, a business owner may combine several types of coverages and pack them so that they cover the specific risks that a business may be exposed to. The advantage of a commercial package policy is that it allows a business owner to pay out a lower amount of premiums than if the business owner purchased a separate policy for each risk.

Similar to a Business Owners Policy(BOP), CPP binds various types of coverage within a single policy. However, a BOP has some drawbacks—it can only cover a few types of risks, therefore it is only available for certain types of smaller businesses. BOP offers a set of policies that cannot be changed. On the other hand, Commercial Package Policies are customizable that can be better customized according to the specific needs of a business. These CPPs are available for a wide range of businesses. Let’s understand a little about the CPP and its coverages.

What does a Commercial Package Policy cover?

A business owner may choose a number of individual policies and put them under CPP according to his/her needs. This allows business owners not only to customize their insurance to their unique risks but also decreases the credibility of coverage overlaps and gaps. Most of the commercial package policies start with:

  • Property insurance: It covers damage or destruction of property like buildings, equipment, inventory, and more.
  • General liability insurance: It is third party insurance that covers the medical and other costs of someone who is injured at your business or from using your product or services.
  • Along with these basic insurance policies, a range of coverages can be added in CPP, including;

  • Business income insurance: It is also known as business interruption insurance. This insurance pays for the lost revenues and covers extra expenses in the case that a business has to shut down or relocate due to tsunami, fire, hurricane, or other covered losses.
  • Business vehicle (or fleet) insurance: All vehicles that are owned and used in a business are covered by this insurance.
  • Business crime insurance: The losses from theft, computer fraud, employee dishonesty, and other business crimes are covered under this policy.
  • Commercial umbrella liability: It provides an extra layer of liability protection by covering extra costs and thus fills the gaps left by other liability coverages.
  • Electronic data processing coverage: The costs associated with the loss of electronic data processing media or devices are covered by this policy.
  • Equipment breakdown: It is also called machinery insurance. The losses from the malfunction of heating, electrical systems, air conditioning, communications systems, and other equipment are covered by this policy.
  • Employment practices liability: It includes expenses related to sexual harassment and other employment issues.
    Inland marine: It provides comprehensive protection to assets that are moveable or mobile in nature; such as transportation of goods over water and land from a warehouse to a store.
  • Pollution liability: This policy covers costs related to pollution, including clean-up.

What is not covered in CPP?

A commercial coverage policy provides a wide range of coverages to a business, but it is also important to know about the coverages that can not be included in CPP. Some of these coverages are the following:

  1. Directors and Officers (D&O) liability
  2. Health and disability
  3. Life insurance
  4. Workers compensation

These coverages require separate policies to be insured.

A commercial package policy protects a business from different losses in one policy. Before purchasing a CPP, it is important for a business owner to understand the risks that his/her business can face. Unnecessary risk coverages in CPP can make higher premiums to the policies. Therefore, these coverages should be avoided to be added to CPP.

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