Chapter 10: Package Policies – An Overview

1. Chapter 10: Package Policies – An Overview

2. Objectives • Discuss the advantages and disadvantages of using package policies; • Give examples of risks that would band would not be eligible for a package policy; • Briefly describe how package policies are rated; • Describe how these policies are package and the typical coverages available.

3. Introduction • Package policies combine a variety of coverages. • Generally a package is various policies in common use. • E.g. Homeowners is physical damage and liability in a single policy. • Many Commercial policies cover several lines of insurance in one policy.

4. Business Package Policies • Packages can be designed for a particular type of business – typically property, business interruption, general liability and often crime with special features and optional coverages specific to that business. • Advantages: • Lower premium • One company – easier handling and less work • Convenience • Avoid gaps • Special features and extensions

5. Business Package Policies • Disadvantages: • Lack of flexibility – changes may still be needed • Endorsements – special care must be taken • Eligibility (Type of Risk Covered) • Eligible Risks • Small to medium sized risks • Excluded Risks • Cooking hazards – fire hazard • Manufacturers • Large risks – determined by floor area or receipts

6. Business Package Policies • Typical Coverages • Package policies are not standardized, but a typical policy covers: • Property insurance – building and contents • Business interruption – extra expense • General Liability – typically $1M limit (higher available) • Crime – often limited with optional extensions.

7. Business Package Policies • Coverage Features • Property (See Pg. 4) • Named perils • Replacement cost • Seasonal or Peak Period automatic increase on contents • Consequential Loss (not covered by all policies) – damage to refrigerated stock • Business Interruption (See Pg. 5) • Named perils • Gross Earnings – no coinsurance • Profits

8. Business Package Policies • Coverage Features • Crime (See Pg. 5) • Money and Securities – inside and outside hold-up • Forgery • Counterfeit Money • General Liability – generally wide and includes: • Tenant’s Legal Liability – damage to rented premises for which insured is legally liable (certain perils). • Non-Owned Automobile – legal liability for negligent driving of non-owned vehicles used on business. Limit is usually $1M, higher limits available.

9. Optional Coverages • These vary between insurers. • Some usual options are: • “All-risks” coverage for Building, Contents and BI. • Earthquake and Flood • Exterior signs – all risk • Exterior (building) glass – special coverage • Valuable Papers • Crime coverage extensions • Employee Dishonesty • Electronic Data Processing • Boiler and Machinery, etc.

10. Limits and Rating • Limits • Limits vary between insurers • Be aware of deductibles • Rating • Simplified rating – based on location, type of occupancy and amounts of insurance purchased. • Options are available – extra cost • Cost comparison – list the desirable coverage and work out the premium under each plan • Quote all suitable coverages, let insured decide. Know your companies’ packages!

11. Coverages not previously discussed • The types of risks for which package policies are available have simple exposures to loss and the standard coverages – and options – offered are adequate. • Get help if special coverages are required.

12. General Liability • Already discussed – please review • One or more liability coverages could be incorporated into the package. • Do not assume standard CGL will be used- wordings differ • Policies may itemize the important exposures in the Insuring Agreements applicable to a particular group which the insurance is aimed. • Professional liability, employer’s liability and advertising liability may be incorporated into “basic” wordings. • Review and analyze the policy to ensure appropriate coverage

13. Crime • Again, coverage varies between the packages. • Possible that there is no crime coverage in the standard policy with coverage available as an option. • Limited coverage in standard policy with wider optional coverage Few companies provide full coverage in their standard package.

14. Crime • Crime coverage usually available are: • Money and securities – hold-up insurance inside the insured’s premises. • Money and securities – hold-up outside the insured’s premises. • Forgery – acceptance of forged cheques, money order and similar documents. • Counterfeit money – acceptance of counterfeit money. • Employee Dishonesty. • Stock Burglary. • Safe Burglary. • Coverage’s a) through d) are typical of limited crime coverage in standard policies.

15. Boiler and Machinery (B&M) • Generally available as an option. • Objects covered are usually heating, hot water and air conditioning systems. • Perils covered are typically described as “breakdown” • Make sure B&M consequential loss is dealt with. • Replacement cost coverage my be provided. • Usually applies to the apparatus itself, other content, building and business interruption where these are coverage in the standard policy.

16. Glass • This exposure should be assessed for risk. • Wording of the policy must be reviewed carefully. • A named perils policy may provide coverage for exterior glass or vitrolite and lettering and ornamentation for any accidental breakage. • May or may not be a limitation on the amount of insurance per plate glass. • A plate glass rider may be added – usually coverage “exterior” glass • Lettering and ornamentation on such a form is included and the framing surrounding the glass. The cost of any temporary boarding up that may be needed will also be paid.

17. Glass • Typical exclusions under a glass rider are: • Fire; • War risks; • Losses during construction, alteration or addition to the premises other than ordinary repair or maintenance; • Vacancy; • Increased cost of repair due to bylaws. • Glass rider will usually cover the replacement cost of glass. • When damage occurs a specialist firm is usually instructed to replace the damaged glass promptly. • Offer glass even though it may not be the most important coverage available.

18. Questions???