Commercial Package Policy (CPP) is a program that was initiated in 1986 by the association of Insurance Services Office to streamline the nature of insurance policies offered by insurance companies (Insurancenoodle.com, 2010). Basically, CPP is a risk insurance package that is designed to cover a broad range of perils such as general liabilities, theft, fire and commercial property among others. It enables insurance clients such as businesses to select particular policies that are appropriate and relevant to their business environment. In this paper, we are going to discuss the relevance of CPP to businesses and the types of businesses that are usually covered under the CPP package.
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To understand how CPP is designed, it is important to know the basic elements of a commercial policy which include; declarations, policy conditions and the cover page (Insurancenoodle.com, 2010). Because many organizations have different risk exposures, it has become necessary to ensure several property exposures with a single policy; this is where CPP comes in. The type of CPP that is chosen by a client, therefore, tends to be unique in every case because specific policies are matched to the business risk areas.
Normally CPP is an insurance option that is designed to cover various commercial businesses such as high value and low-value businesses including multiple localized businesses. The major type of CPP coverage for business include; commercial properties, professional liabilities, commercial general liability and commercial inland marine among others (Insurancenoodle.com, 2010).
In practice, CPP covers more than the mentioned categories of businesses since it is designed in a flexible way that still allows other business to be covered. This is because CPP coverage offers unique advantages to business establishments, one of which include consolidation of insurance policies in a single package.
CPP has approximately three general coverage forms besides other coverage types that are tailored to the type of business, these major types of coverage include; property form, liability insurance and specialized property (Insurancenoodle.com, 2010). The property form is used for such assets like buildings, valuable papers and premises, while liability insurance is used to cover claims from a third party that emanate from damage or injury lawsuits up to the limit of the policy. But this are not the only coverage forms that are catered for in a CPP, most often other claims can be included with an additional premium such as costs of defending a lawsuit.
These being the CPP coverage areas, there are limitations and exceptions to the nature of claims that CPP can be used to cover in a business. As a rule of thumb CPP insurance package is not used to cover the following claims: employee compensation, insurance policies that involve health, disability or life, as well as specialized services such as fiduciary liability and director’s liability (Insurancenoodle.com, 2010). Perhaps it is because of these exceptions that make it possible for CPP premium to be cost effective since the nature and extent of coverage is usually a major determinant of its cost. Other factors that influence the cost of a CPP package include specific factors such as value of a building, its age and construction materials in the case of property coverage.
Out of design, CPP are tailored in a way that enable large companies to save on their overall insurance policy while at the same time remain cost effective for the smallest of the companies. As a result large companies will benefit mostly by picking several coverage forms but with less specific policies per coverage. On the other hand small companies should aim to have a single coverage form with several specific policies in order to minimize cost and maximize on CPP coverage. For the Mid-size Company, the idea is therefore to strike a balance between these two coverage areas.
Insurancenoodle.com. (2010). Commercial Package Policy. Web.