Commercial Package Policy (CPP) - What Does It Consist Of?
A commercial package policy (CPP) is an insurance policy that combines commercial general liability and commercial property insurance. A CPP lowers costs, broadens coverage, and simplifies the buying process.
CPPs are among the most widely purchased insurance policies in the United States. By combining two of the most popular coverages in a straightforward way, they provide value for the customer and the insurance companies that underwrite the policies, which translates to better rates.
Similar to the business owners policy (BOP), the CPP follows general policy forms provided by the Insurance Services Office (sometimes referred to as the ISO commercial package policy). Unlike the BOP, the CPP is used to insure larger and frequently higher-risk businesses. These are the gold standard coverage forms in the industry; the only difference is that they are packaged together in a single policy.
The CPP is considerably more customizable to your business and is a popular policy for companies of all sizes that need more from their insurance policy.
Here are the commercial package policy components:
CP 00 10 - Building and Personal Property Coverage Form
The CG 00 01 is your general liability insurance policy, and the CP 00 10 insures your buildings and contents.
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Commercial Package Policy Coverage - What’s Missing?
It’s common to wonder if there are certain elements of coverage that are left out if you choose a CPP versus buying two standalone policies. But don’t worry—nothing is missing. All the standard inclusions on a general liability and commercial property policy are present if you go with the “combo” option. Here’s what you can expect to be covered in a quality CPP policy:
General Liability Insurance
If your business operations cause bodily injury or property damage to others, your general liability insurance will kick in. General liability covers you from slips and falls, product liability, and similar claims. Your policy includes coverage for the costs directly associated with the injury or damage, as well as costs for legal defense if you need to settle or fight a lawsuit.
The three core coverages of a commercial general liability policy include:
- Coverage A: Bodily Injury. You are covered when your business’s operations, products, or completed work cause bodily injury (physical injury, sickness, disease) or property damage (physical harm, loss of use). Coverage A also includes a "products-completed operations hazard" provision, which protects you if a claim arises after the work has been completed or product has been sold.
- Coverage B: Personal And Advertising Injury. This coverage protects you from claims of libel, slander, invasion of privacy, copyright infringement, and similar.
- Coverage C: No-Fault Medical Expense Coverage. Coverage C is designed to help businesses avoid expensive litigation by paying the medical bills of people who sustain bodily injuries on your premises or due to your operations. Coverage C typically has a lower limit than Coverage A and does not require you to be found legally liable for the injury, which is why it is often called “goodwill coverage.”
While general liability covers people, building insurance covers things. More specifically, commercial property insurance covers assets you own from direct damage. This type of insurance is often required if a bank financed your property, but most business owners voluntarily choose to purchase this coverage to protect their investments regardless. Commercial property insurance includes coverage for:
- Your Building
- A structure you own
- A structure you do not own but are responsible for insuring (a triple net lease)
- Completed additions
- Indoor and outdoor fixtures
- Permanently installed machinery and equipment
- Your Business Personal Property
- The contents in and around the building (e.g. furniture, fixtures, machinery and equipment, stock, etc.)
- Tenant upgrades made to a rented space
- Leased personal property for which you have a contractual responsibility to insure
- All other personal property you own and use in your business, even if it’s off-premises or in transit
- Personal Property of Others
- The property of others in your care, custody, and control
- Property that you are borrowing
- Customers’ property
What are the benefits of a CPP?
The CPP policy is a great decision for many U.S. companies. Most businesses – from contractors to manufacturers – will be able to take advantage of a package policy. What are the benefits, though?
The CPP Usually Costs Less
Combining the most common insurance policies a business would buy into a single policy has some significant benefits. It allows the insurer to spread their risk over multiple coverages.
For example, if you operated a retail store and owned the building the store was located in, a commercial package policy would cover the liability arising out of the retail store and the property.
Since liability and property claims are not related (for example, hurricane damage does not happen as a result of a slip and fall lawsuit), insurance companies can collect the premium for both and reallocate liability premiums to offset the risk of a property claim (and vice versa). This is especially lucrative for the insurance buyer when shopping their insurance. Insurance companies always ask for "loss runs" so they can compare how many losses have been paid vs. how much of the premium has been paid in.
If you have your property and liability insurance in a single policy, it is much easier to absorb claims and not see your rates go up.
Fewer insurance policies means less administration and easier processing of claims. Although a CPP doesn't include every coverage you need, its consolidation of insurance can make life easier.
You will have fewer bills, fewer questions about which policy covers what, and less complexity so that you can continue doing what you do best: Running a business.
CPPs Usually Have Better Coverage
Even though a CPP combines coverage forms that would typically be on a standalone insurance policy, commercial package policies generally include more coverages.
Sure, you can find a specialty policy that covers some of these items, but it will be extremely cost-prohibitive. For example, "property in transit" is a very common add-in that covers items you carry in a vehicle with you in the event of theft or an accident. This coverage is generally included for free, whereas if you were to purchase a separate inland marine policy that would typically have this coverage, it could cost you more than the property you are taking with you.
This applies to other line items like employee dishonesty, employee benefits liability, hired and non-owned auto, and cyber liability.
Is CPP the best choice for your business?
It can be confusing to make sense of the different policy types, especially when policies can be customized and combined. We always advise that you speak with an insurance expert for an assessment of what coverage your specific company needs, but here is some general information to start with:
- Low-Hazard Business - Business Owners Policy (BOP): This combines general liability and commercial property coverage into one policy. The BOP is ideal for low-risk, small businesses (there is a gross sales cap of $5-15M) that bear similar risks to other professions in their field.
- Medium-Hazard Business - Commercial Package Policy (CPP): Similar to the BOP, the CPP combines general liability and commercial property coverage, but offers more customization and can scale larger. CPPs suit larger, higher risk businesses exceeding a $15M gross sales cap that need tailored insurance products. CPP policyholders typically include mid-market construction firms, real estate investors, hotel chains, etc.
- High-Hazard Businesses - Monoline Policies: These policies serve highly hazardous, extremely unique, or sizable businesses that usually require individual policies per coverage line. Pharmaceutical, toy production, and structural welding companies are all good candidates for monoline policies. For example, a company that develops diabetes medication will likely have different people underwriting its liability policy and property insurance policy. The industry is too niche, too hazardous, and too complicated for one person to fully underwrite.
Your Insurance Company Options
While monoline policies are popular in the excess and surplus insurance market, chances are you will have more options looking for a CPP unless you are a larger corporation with more complex needs. With more carriers able to provide quotes, you will most likely get a better policy at a lower rate, even if you do not include the cost savings associated with bundling coverage.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.
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