Commercial Package Policy
There are 4 basic sections to the package policy:
Section 1 – Property
Section 2 – Liability
Section 3 – Crimes
Section 3 – Boiler & Machinery
Building and Personal Property Coverage Form –
Coverage A – Building – This insures the building or structure described in the declarations, including completed additions, fixtures (including outdoor fixtures), permanently installed machinery & equipment, personal property owned by the insured used to maintain or service the location and it would also cover materials, equipment & supplies at, on, next to or w/in 100ft. of the described location used for making alterations or repairs of any structures at the location.
Coverage B – Business Personal Property – This covers your business personal property at, on, next to or w/in 100ft. of the described location. Your business property would include furniture & fixtures, machinery & equipment, inventory or stock-in-trade, and improvements & betterments.
Coverage C – Personal Property of Others – This covers the property of others in your care, custody and control, located at, on, next to or w/in 100ft. of the described location. *Bailee Coverage
Property Not Covered –
1) Accounts, bills, deeds, evidence of debts, money & securities
2) Animals unless bonded by you or if owned by you only as stock while inside of buildings.
3) Bulkheads, piers, pilings and wharves.
4) Growing crops & lawns
Additional Coverages –
1) Debris Removal – Coverage is limited to 25% of the damage to the property insured.
2) Preservation of Property – Removal damage is for 30 days after removal.
3) Fire Dept. Service Charge – $1000.
4) Coverage Extensions –
a. Buildings – Newly acquired or constructed buildings under Coverage “A” are covered automatically for up to $250K.
b. Business Personal Property – B.P.P. at newly acquired locations are automatically covered for up to $100K.
These coverages are for 30 days or the end of the policy period, whichever is earlier.
Cause of Loss Forms –
1) Basic Cause of Loss Form – The following perils are included: fire, lightning, E.C. Perils, VMM, sprinkler leakage, and sinkhole collapse.
2) Broad Cause of Loss Form – This includes the same perils as basic form and includes 5 additional coverages: falling objects, weight of ice, sleet & snow, water damage, collapse, and glass breakage (this covers up to $500 in any 1 loss but not more than $100/pane.)
3) Special Form – This provides coverage on an all-risk basis. The special cause of loss form does not exclude theft, however, it does exclude theft committed by the insured or employees.
Builder’s Risk Insurance – This is designed to cover buildings in the course of construction against insured peril damage. When the building is finished, the policy is cancelled on a pro-rata basis and is rewritten subject to the appropriate rules. There are 2 forms in general use:
1) The Completed Value Form – The policy is written in an amount equaling the completed value of the structure but @ greatly reduced rates. This is the safest form, as it eliminates underinsurance at the time of loss.
2) Monthly Reporting Form – This permits the insured to make monthly reports of values going into the building. There is automatic coverage b/t reports, provided the previous reports were correct.
Time Element Coverages– These are designed to cover the loss which is brought about through the loss of use of the insured property due to insured periled damage. Recovery is measured on the basis of time.
These would include: Business Income; Extended Business Income; Business Income From Dependent Properties; Extra Expense Insurance.
1) Business Income Coverage – a.k.a. Business Interruption Insurance
– This does for the insured what the business would have done had no loss occurred.
– Coverage starts from the date of loss and continues until the premise is ready to resume operations or the policy limit is exhausted.
– Coverage is also provided for loss of use due to actions of a civil authority. For a civil authority loss, coverage beings 3 days after the event, but the coverage is limited for only 3 weeks.
– Co-insurance applies to business income forms. The insured may elect to cover anywhere from 50% to 110% of their annual gross earnings including payroll.
The Business Income Formula:
Gross Sales – Cost of Merchandise = Gross Earnings
Gross Earnings x Co-Insurance % = Amount of Ins.
Methods of Avoiding the Co-Insurance Penalty – For additional premium, the insured may add either of the following:
a) Maximum period of restoration – This limits the amount of time benefits will be paid.
b) Maximum monthly indemnify – (restaurants)
A factor shown as a fraction is listed in the Declarations, which limits the amount of insurance available for any 1 month.
Ex. 1/3, 1/4, 1/6, 1/12
Begins the day of policy. Recommended for established bus.
2) Extended Business Income Coverage – This extends the coverage after a property is actually repaired to a maximum of 30 days. (Encourage business to reopen.)
3) Business Income From Dependent Properties – a.k.a. Contingent Business Interruption Insurance – This provides coverage to the insured for the suspension of their business when losses occur to other premises such as a supplier or customer.
4) Extra Expense Insurance – This is designed for businesses which must continue to operate at the time of loss regardless of the expenses incurred.
Business Owner’s Policy – B.O.P.
This is a pre-packaged form designed for small businesses, covering buildings and/or business personal property.
The BOP also provides liability coverage on an occurrence-form basis.
Coverage A – Building
This covers the building & structures at the described premises, completed additions, permanently installed machinery or equipment, personal property owned by the insured used to maintain or service the location & materials, equipment and supplies, at, on, next to or w/in 100ft. of the described location used for alterations or repairs of any structures at the location.
Coverage B – Business Personal Property
This covers the property owned or used by the insured, at, on, next to or w/in 100ft. of the described location. Improvements or betterments, personal property of other in the business’ care.
The BOP is offered in 2 versions:
1) Standard Form – The following perils are included: fire, lightning, E.C. Perils, VMM, sprinkler leakage, sinkhole collapse, accident to transporting conveyance.
2) Special Form – All risks
Additional Coverage for Both Forms –
1) Debris Removal is 25% of the damaged insured.
2) Preservation of property – 30 days.
3) Business Income Coverage
4) Extended Business Income
5) Extra Expense Coverage
6) Forgery & Alterations
7) Exterior Glass
Coverage Extensions for Both Forms –
1) Business personal property at newly acquired premises for $100K.
2) Personal effects of the insured and/or their employees up to $2500.
3) Valuable papers & records – This pays the cost to repair or replace documents or other records. Coverage is limited to $5000 on premises and $2500 off premises.
Optional Coverages – for additional premium
1) Outdoor signs
2) Interior glass
3) Employee dishonesty
4) Burglary & robbery is available on the standard form only
5) Money & securities is available on the special form only
Property Not Covered –
1) Aircraft, motor vehicles, boats or their equipment.
2) Growing crops & lawns.
Boiler & Machinery Coverage Form – a.k.a. Equipment Breakdown Coverage Form
– This is designed to cover damage caused by the explosion of certain specific boilers and the breakdown of certain specified machines.
– These boilers & machines are referred to as objects and are listed in a schedule.
– This coverage provides an important service in the form of an inspection & engineering service.
– Cover under B & M:
i. Damage to the insured property including the object.
ii. Replacement cost – optional
iii. Expediting expenses which arrives through the attempt to restore operations.
iv. Property damage liability for the property of others in the insured care, custody and control.
v. Legal Defense
vi. Automatic coverage on newly acquired objects similar to those already covered.
– Coverage is for 90 days of the end of the policy period, whichever is earlier.
FAIR Plan – Fair Access to Insurance Requirement
If coverage can not be provided in the private market, FAIR plan allows business owners’ to obtain insurance through this means.