July 20th, 2020
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
It 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.
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?
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.
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.
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.
Although the CPP is an excellent fit for a large portion of companies in the U.S., it is not the best fit for every company. Depending on what you do, a CPP may not even be available to you.
If you are in a high-hazard industry such as energy or aerospace, there is a good chance that you will be unable to find a commercial package policy. The companies and underwriters that write the liability are usually specialists in the field and do not handle property insurance; they are laser-focused on underwriting one product for one industry.
Many of these businesses need to purchase standalone liability and property policies.
Since a CPP insures both liability and property risks, there is no need to purchase one if you do not have any property to insure. Although you might not receive some of the benefits associated with bundling coverage, it will probably cost less to not purchase property insurance at all. This is a perfectly fine reason to avoid a commercial package policy.
The larger your business, the harder it will be to find a commercial package policy. At some point, there is so much underwriting and risk associated with each policy, the insurance carriers do not want to bundle it.
Additionally, you might need multiple insurance carriers providing coverage on the same policy through the use of layering or quota sharing. A package policy is not designed for the complexity of an insurance program like this.
The commercial package policy is one of our most commonly written insurance policies. Not only does it provide broad coverage, but it helps you purchase the coverage at a reasonable price.
If you are interested in talking to an expert about whether your business should or should not purchase a policy like this, let us know. We will have a 1-on-1 conversation with you and give you honest recommendations for your business.
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