Commercial Package Policy Flashcards
The Commercial Package Policy - Learning Objectives
11.1 Learning Objectives
After completing The Commercial Package Policy, you will be able to do the following:
Identify the advantages of purchasing a commercial package policy over buying separate monoline policies
List the required components of a commercial package policy
Define coverage part and interline endorsement
Identify the information contained in the common policy declarations
Explain why a first named insured is designated in a commercial package policy
Describe the purpose of each of the common policy conditions
The Commercial Package Policy - Introduction
11.2 Introduction
Throughout the remainder of this course, we’ll discuss insurance policies designed for businesses. Because businesses share many of the same exposures to risks as individuals do, you will find many similarities between personal and commercial forms. Businesses also have many unique exposures that require different policies or modifications to the coverages we’ve already discussed.
Just as families often choose the convenience of package policies such as the homeowners policy or personal auto policy, businesses often choose to purchase several different lines of coverage in a single policy.
One of the most important commercial packages is ISO’s commercial package policy (CPP). The CPP can be used to provide almost any commercial insurance the insured might need. Almost all commercial risks are eligible for coverage under the CPP.
Like all package policies, the CPP offers advantages to both the insured and the insurer. Repetitive information is eliminated, and the policy is easier to understand. Because of the economies an insurance company may realize when carrying several different lines of coverage for the same insured, the company is able to make package discounts to the insured, which provides further incentive for a package plan.
The Commercial Package Policy - Eligible Coverages
11.3 Eligible Coverages
The CPP can include almost any commercial coverage the insured might need, with the exception of ocean marine, workers’ compensation, and aviation insurance. It can include:
commercial property coverage;
commercial general liability coverage;
commercial auto coverage;
commercial crime coverage;
commercial inland marine coverage;
boiler and machinery coverage;
professional liability coverage;
employment practices liability coverage;
farm coverage;
liquor liability coverage;
pollution liability coverage; and
capital assets program (output policy).
11.3 Eligible Coverages (cont.)
The following coverages are not eligible:
Businessowners policy
Risks eligible for the homeowners program
Coverages excluded by state regulation
You’ll learn more about each of these lines of insurance as you progress through the course.
The Commercial Package Policy (CPP) - Eligible Coverages
11.3 Eligible Coverages
Each line of insurance eligible for the CPP has its own coverage part consisting of a variety of mandatory and optional forms that are used to provide the coverage desired.
The forms and endorsements available under each coverage part can be used to issue a policy covering a single line of insurance or combined to provide a commercial package policy.
A commercial package policy consists of:
- common policy declarations;
- common policy conditions; and
- two or more coverage parts.
For instance, a commercial package policy might include both a commercial property coverage part and a commercial general liability coverage part.
A CPP might also contain interline endorsements,
endorsements that may be used with more than one line of insurance. Some interline endorsements are mandatory, while others are optional.
The Commercial Package Policy CPP - Common Policy Declarations
11.4 Common Policy Declarations
Although we’ll discuss the individual coverage parts of the CPP in subsequent units, in this unit we’ll review the two general forms that are a part of every CPP and are also included in any monoline policy issued using CPP forms: the common policy declarations and the common policy conditions.
The common policy declarations contains information about who is insured, when he is insured, and for what lines. It includes:
1: the name and mailing address of the named insured;
2: the policy period, including the time and date coverage begins and ends;
3: a description of the covered business;
4: the coverage parts purchased and their premiums; and
5: a list of forms applicable to all coverage parts.
The Commercial Package Policy - Common Policy Conditions
11.5 Common Policy Conditions
The common policy conditions apply to all of the coverage parts contained in the CPP.
Under the common policy conditions, certain responsibilities and obligations are assigned to the first named insured—the person whose name is listed first in the declarations.
It is necessary to specify the first named insured because the CPP may be issued to more than one named insured, such as business partners.
The Commercial Package Policy CPP - Common Policy Conditions
11.5.1 Cancellation
The cancellation condition sets forth the circumstances under which the policy may be canceled.
The first named insured must cancel the policy in writing, and any premium refund due will be sent to the first named insured. This refund may be less than a pro rata refund to make up for the expense of issuing the contract.
If the insurance company cancels, it must mail a written notice to the last known address of the first named insured. Ten days’ notice is required for cancellation for nonpayment of premium; 30 days’ notice is required for cancellation for any other reason permitted by the policy. The premium is refunded to the first named insured on a pro rata basis.
Remember that although this is the cancellation condition that appears in the standard contract, some states may legislate unique cancellation rules for policies issued in those states.
The Commercial Package Policy CPP - Common Policy Conditions
11.5.2 Changes, Premiums
Along with the right to cancel the policy, the first named insured has some other rights and responsibilities.
The changes condition states that –only the first named insured is authorized to make changes in the terms– of the policy with the consent of the insurance company. Terms can be amended or waived only by an endorsement issued by the insurer that is made a part of the policy.
The premiums condition states that the first named insured is responsible for the payment of all premiums and will receive any return premiums due.
The Commercial Package Policy - Common Policy Conditions
11.5.3 Examination of Books and Records, Inspections and Surveys
The common policy conditions also give the insurance company the right to obtain information it needs to accurately rate the policy and provide the appropriate coverage.
The examination of your books and records condition states that the company may examine and audit the insured’s books and records at any time during the policy period and for up to three years after the end of the policy period.
The inspections and surveys condition gives the company the right to make inspections or surveys of the insured business at any time. The company may choose to report on the conditions it finds and recommend changes. These inspections are related to insurability and premiums only and are not considered safety inspections.
The insurer will not warrant that conditions are safe or healthful or comply with laws or regulations.
This condition does not apply to inspections performed to certify boilers, elevators, or pressure vessels under state or local laws.
The Commercial Package Policy CPP- Common Policy Conditions
11.5.4 Transfer of Rights and Duties
Finally, the transfer of your rights and duties under this policy condition states that
insureds’ rights and duties under the policy cannot be transferred without the written consent of the insurance company, except in the case of the death of a named insured.
This is sometimes called the assignment clause, and it is a common feature of both personal and commercial lines policies.
If the named insured dies, his rights are transferred to the deceased’s legal representative, but only while the representative is acting within the scope of the duties of the legal representative. Until a legal representative is appointed, anyone having proper temporary custody of the property will have the insured’s rights and duties as they relate to the property.
The Commercial Package Policy - Unit Test
Question
Which of the following lines of insurance can be included in the CPP?
1: Boiler and machinery 2: Aviation 3: Homeowners 4: Ocean marine
The CPP can include almost any commercial coverage except for ocean, marine and aviation insurance.
The homeowners policy could not be included because it is a personal lines policy.
The Commercial Package Policy - Unit Test
Question
Who may cancel a commercial package policy?
1: The insurance company only 2: First named insured 3: Any named insured 4: Any named insured or the insurance company
Guess: First named Insured…Correct
Under the common policy conditions, certain responsibilities and obligations are assigned to the first named insured. One of these is cancellation of the policy. The insurance company may also cancel the policy under certain circumstances.
Which one of the following is NOT one of the components of a commercial package policy?
1; Common policy conditions 2; Coverage part 3: Common policy declarations 4: Common insuring agreements
Guess 2: wrong
A commercial package policy consists of
- common policy declarations,
- common policy conditions,
- and 2 or more coverage parts.
It may also contain interline endorsements.
The Commercial Package Policy - Unit Test
Question
An endorsement included in a commercial package policy that modifies more than 1 line of insurance is called:
- an interline endorsement - an insuring endorsement - a monoline endorsement - a common policy endorsement
Correct Answer!
An interline endorsement modifies more than one line of insurance. Some interline endorsements are mandatory, while others are optional.
The Commercial Package Policy - Unit Test
Question
Which one of the following statements concerning the commercial package policy is NOT correct?
1: A complete CPP includes common policy declarations, common policy conditions, and 2 or more coverage parts. 2: Almost all commercial risks are eligible for coverage under the commercial package policy. 3: It can only include property and liability coverage. 4: The insured can choose a variety of eligible commercial coverages to tailor the package to fit the insured's specific business insurance needs.
my choice; 3 Correct…
Other types of coverage besides property and liability may be included in a CPP.
The Commercial Package Policy - Unit Test
Question
All of the following information is contained in the common policy declarations EXCEPT;
1: a description of the business being covered 2: the conditions specifying the insured's duties following a loss 3: the insured's name and mailing address 4: the policy period
my guess 2; correct
The common policy declarations contains information about
1: who is insured,
2: when that person is insured, and
3: for what lines that person is insured.
It includes the name and mailing address of the named insured, the policy period, a description of the covered business, the coverage parts purchased and their premiums, and a list of forms applicable to all coverage parts.
The Commercial Package Policy CPP- Unit Test
Question
The common policy conditions apply to (all/selected) coverage parts included in a CPP.
- All - Selected
The common policy conditions are included in every CPP and every monoline policy issued using CPP forms. The common policy conditions apply to ALL of the coverage PARTS contained in the CPP.
The Commercial Package Policy - Unit Test
Question
The person whose name is listed first in the declarations and who is assigned certain responsibilities and obligations is the (first named/additional) insured;
1: Additional 2: First named
2: First named
Under the common policy conditions, certain responsibilities and obligations are assigned to the first named insured—the person whose name is listed first in the declarations. It is necessary to specify the first named insured because the CPP may be issued to more than one named insured, such as business partners. The first named insured may cancel the policy and make changes to the policy with the consent of the insurance company. The first named insured is also responsible for paying all premiums and will receive any return premiums due.
