Basics of Package Policies

Package wrapped in brown paper with white string
Image courtesy of [Kamo] / Getty Imaages.

Many insurance coverages obtained by businesses are purchased as part of a package policy. As its name suggests, a package policy is an insurance policy that includes more than one coverage.

Advantages and Disadvantages

Package policies offer some advantages over individual policies. One is convenience. By purchasing a package, a business owner can obtain (and insurers can provide) multiple coverages under a single policy.

A package policy requires fewer forms and endorsements than would be needed if the coverages were provided under separate insurance contracts. This is because a package includes provisions, such as Common Conditions or Common Exclusions, that apply to all coverages included in the policy. Another advantage of package policies is cost. Insurance coverages are generally cheaper when purchased as part of a package than when purchased separately.

Package policies have some disadvantages. For one thing, they can become unwieldy. This is especially true of policies that contain numerous endorsements, location schedules, rating worksheets and other documents. Policyholders may have difficulty determining which documents go with which coverages. Secondly, a package may contain coverages that a business owner does not need. These coverages may be included automatically. The insurer may not offer the option to exclude them in exchange for a reduced premium.

Types of Packages

There are three general types of package policies that are available to businesses: businessowners policies, commercial package policies, and specialty package policies.

Businessowners Policies

A businessowners policy (BOP) is designed for small and medium-sized businesses. It includes both commercial property and general liability coverages.

To qualify for a BOP a business must meet the insurer's eligibility requirements. Eligibility is typically based on the following:

  • Type of Business Insurers typically provide BOPs only to certain types of businesses. Examples are apartment or office building owners, contractors, retailers, service providers, and food establishments. Businesses such as manufacturers or bars may be ineligible.
  • Revenue or Payroll Because BOPs are designed for small to mid-sized businesses,  insurers may decline to offer them to companies that generate more than a specified amount of revenue or payroll. 
  • Height and Square Footage To be insured under a BOP, a building must meet square footage and height limitations.

Some insurers issue BOPs using standard ISO policy forms while others use forms they have developed themselves. Many BOPs include coverages such as the following:

Additional coverages may be available via an endorsement. Examples are liquor liability, sewer backup, and employee benefits liability coverages.

Commercial Package Policy

A commercial package policy (CPP) consists of two or more commercial coverages, such as general liability and commercial auto. If you are insured for general liability or commercial property under a package policy that is not a BOP, your policy is a CPP. 

The eligibility requirements for a CPP are much less restrictive than those for a BOP. Most types of businesses may be insured under a CPP.  A CPP is considerably more flexible than a BOP. Coverages can be tailored to the needs of each specific business.

Specialty Packages

Many insurers have developed package policies that provide specialized coverages. Examples are management liability packages and foreign packages.  A management liability policy includes coverages designed to protect company executives, including directors and officers.

It may also protect the company (entity) itself for its vicarious liability for negligent acts committed by management staff. A management liability policy typically includes coverages such as directors and officers liability, employment practices liability, and fiduciary liability.

A foreign package policy includes coverages needed by businesses that conduct operations outside the United States. It may include any of the following:

Monoline Policies

Some coverages are not typically provided as part of a package policy. These coverages are written by themselves under a monoline policy. An example is ocean cargo insurance, which covers goods transported via an ocean-going vessel.