Chapter 10 Package Policies An Overview 1 Objectives

Chapter 10: Package Policies – An Overview 1

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. 2 C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 3

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 C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 4

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 C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 5

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 $1 M limit (higher available) » Crime – often limited with optional extensions. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 6

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 C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 7

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 $1 M, higher limits available. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 8

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 9

Limits and Rating » 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! C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 10

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 11

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 C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 12

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 13

Crime » Crime coverage usually available are: a) Money and securities – hold-up insurance inside the insured’s premises. b) Money and securities – hold-up outside the insured’s premises. c) Forgery – acceptance of forged cheques, money order and similar documents. d) Counterfeit money – acceptance of counterfeit money. e) Employee Dishonesty. f) Stock Burglary. g) Safe Burglary. » Coverage’s a) through d) are typical of limited crime coverage in standard policies. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 14

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 15

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 16

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. C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 17

Questions? ? ? C 72 – Intro to Risk Mgmt and Comm. Insurance – Chapter 9 18