Key Takeaways
- A Commercial Package Policy (CPP) combines TWO OR MORE coverage parts into a single policy, providing PREMIUM DISCOUNTS of 5-15% compared to purchasing separate policies.
- Every CPP includes COMMON POLICY CONDITIONS and COMMON POLICY DECLARATIONS that apply to all coverage parts—these are tested heavily on exams.
- The MODULAR STRUCTURE allows businesses to customize coverage by adding or removing coverage parts (property, liability, crime, inland marine, etc.).
- Commercial property insurance covers approximately $2.5 TRILLION in business assets in the United States annually.
- Over 80% of small businesses purchase some form of commercial property coverage, with the average claim exceeding $35,000.
Commercial Package Policy (CPP)
What is a Commercial Package Policy?
A Commercial Package Policy (CPP) is an insurance policy that combines two or more coverage parts into a single, unified policy. This modular approach allows businesses to customize their coverage while benefiting from administrative efficiency and premium discounts.
Key Concept: A CPP must include at least TWO coverage parts to qualify as a "package." A single coverage part would be a monoline policy.
CPP Structure and Components
Every Commercial Package Policy consists of:
| Component | Purpose | Example |
|---|---|---|
| Common Policy Declarations | Identifies named insured, policy period, premium | Business name, address, policy dates |
| Common Policy Conditions | Conditions applying to ALL coverage parts | Cancellation, changes, examination of books |
| Coverage Parts | Specific coverages with own forms | Property, Liability, Crime, Auto |
| Coverage Forms | Detailed coverage provisions | Building and Personal Property Form |
| Endorsements | Modifications to coverage | Additional insured, coverage extensions |
Common Policy Conditions
These conditions apply to ALL coverage parts in the CPP:
1. Cancellation
- Insurer must give 30 days written notice (10 days for non-payment)
- Insured may cancel at any time with written notice
- Premium refund calculated on pro rata or short-rate basis
2. Changes
- Policy can only be changed by written endorsement
- Oral agreements are NOT binding
3. Examination of Books and Records
- Insurer has the right to audit the insured's records
- Applies for up to 3 years after policy expiration
4. Inspections and Surveys
- Insurer may inspect premises and operations
- Inspections are for underwriting purposes only
- Does NOT constitute a safety warranty
5. Premiums
- First Named Insured responsible for all premiums
- Premium may be adjusted by audit
6. Transfer of Rights and Duties
- Coverage is NOT transferable without written consent
- Exception: Death of named insured (transfers to legal representative)
Available Coverage Parts
| Coverage Part | What It Covers | Common Forms |
|---|---|---|
| Commercial Property | Buildings, business personal property, income | BPP, Business Income |
| Commercial General Liability | Third-party bodily injury, property damage | CGL Occurrence/Claims-Made |
| Commercial Crime | Employee theft, forgery, computer fraud | Crime Coverage Form |
| Commercial Inland Marine | Property in transit, contractors equipment | Various floater forms |
| Commercial Auto | Business vehicles | Business Auto Policy |
| Equipment Breakdown | Mechanical/electrical breakdown | Equipment Breakdown Form |
| Farm | Agricultural operations | Farm Coverage Forms |
Benefits of Package Policies
- Premium Savings: 5-15% discount vs. separate policies
- Single Expiration Date: Easier administration
- Reduced Coverage Gaps: Coordinated coverage parts
- Simplified Billing: One premium, one invoice
- Consistent Conditions: Common policy conditions apply throughout
Exam Focus: CPP vs. Monoline
| Feature | Commercial Package Policy | Monoline Policy |
|---|---|---|
| Coverage Parts | Two or more | Single coverage |
| Premium | Discounted | Full rate |
| Declarations | Common declarations page | Individual declarations |
| Conditions | Common policy conditions | Coverage-specific only |
| Flexibility | High (modular) | Limited |
What is the minimum number of coverage parts required for a policy to qualify as a Commercial Package Policy (CPP)?
Under the Common Policy Conditions, how much advance notice must an insurer provide before canceling a CPP for reasons other than non-payment?
Which Common Policy Condition allows the insurer to audit the insured's financial records for up to three years after policy expiration?
7.2 Building and Personal Property Coverage Form
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