Does my small business need a commercial package policy?

What is a commercial package insurance policy?

A CPP is a form of business insurance that packages several types of coverage into one policy. While a business owner’s policy is a common form of coverage for a broad range of businesses, CPPs are more customizable, so you can add coverages specific to your industry and risks. 

"A BOP is a pre-packaged policy. It's mainly designed for small businesses with straightforward risks," says Nick Schrader, owner of Texas General Insurance, a Houston-based insurance company. 

On the other hand, he says, “[CPPs] are well-suited for businesses that need coverage beyond what a BOP offers, such as higher limits or additional endorsements.”

What is included in a commercial package policy

The strength of a CPP is that it's highly customizable. Most plans contain two main forms of coverage: 

• Commercial property: Property insurance covers damage to your buildings, equipment, inventory or supplies caused by a covered incident, such as vandalism or a fire. 
• General liability: General liability covers legal costs and medical expenses if someone is injured at your business or as a result the use of your products or services. 

From there, business owners can personalize their CPP coverage by adding other insurance. In addition to commercial auto, professional liability and commercial umbrella, a CPP could include:

• Business crime: This form of insurance pays for losses related to burglary, computer fraud or employee dishonesty. 
• Business income: Sometimes referred to as business income interruption insurance, this form of coverage helps replace lost income if your business has to pause operations due to a covered incident. For example, if there's a fire and your retail store has to close, this form of coverage helps replace your lost revenue so you can keep your business operational (and pay your workers). 
• Commercial fleet: If you own vehicles for your business, such as delivery vans, this will provide vehicle coverage.
• Employment practices liability: If you have a large number of employees, this insurance will cover the costs of disputes with workers over discrimination, termination or sexual harassment. 

Other types of coverage that can be added to a CPP include pollution liability protection, equipment breakdown insurance and farm and ranch insurance. 

What is not included in a commercial package policy

While a CPP insurance policy can provide coverage in several areas, it's not wholly comprehensive. As a business owner, you may need to purchase other types of coverage separately, such as the following: 

• Director and officer liability: Director and officer liability (D&O) provides protection for claims made against individuals serving on the board of directors or as company officers. 
• Health and disability: If you plan to offer group benefits to your employees, such as health insurance or disability insurance, you'll need to purchase those products separately. 
• Life insurance: Life insurance, either for yourself or for your employees, pays a death benefit if an insured person dies while the policy is in force. 
• Workers’ compensation: This coverage pays for employees' medical expenses and lost income if they're unable to work due to an injury or illness incurred while on the job or on the business premises. Employers in just about every state are legally obligated to maintain workers’ compensation insurance. 

Benefits of commercial package insurance

As a business owner, there are several benefits to opting for CPP coverage: 

• Personalization: While BOPs are limited to certain business types and offer a basic package of coverages, CPPs allow for more customization. In addition to basic property and general liability coverage, you can personalize your policy with added coverage and add-ons to protect your business. 
• Simplicity: CPPs are simpler than buying multiple insurance products and keeping track of their renewal and payment due dates. You can package the coverage into one policy with one renewal and payment due date. 
• Cost: A CPP is relatively affordable. You can save money by purchasing a CPP rather than buying separate insurance products.

How much does commercial package insurance cost?

Every business is different. The cost of your policy will vary based on your location, industry and business size. However, the average cost of a commercial package policy is $90 per month, or $1,075 per year, according to Insureon. The small business insurance broker says the most popular policy is $1 million / $2 million – a $1 million per occurrence limit, which means the insurer will pay up to $1 million to cover any single claim; and a $2 million aggregate limit, which means the insurer will pay up to $2 million to cover claims over the life of the policy.

CPPs are more expensive than BOPs. On average, BOPs cost $684 per year — about $400 less than a CPP — so they make sense for smaller businesses with limited risks. 

Who is eligible for a commercial package coverage policy?

CPPs are suitable for a wide range of businesses. Requirements vary by insurer; generally, eligibility is based on industry, number of employees and risk exposure. 

CPPs are best for small to mid-sized businesses that have more complex insurance needs than other small businesses. Businesses with added risks, such as those in manufacturing, construction, shipping or hospitality may benefit from opting for a BPP. 

How does commercial package insurance work?

As a bundle of coverages, CPPs work by allowing business owners to choose what coverage they want. When a business owner buys a policy, they can choose what insurance products to include and what coverage limits they want. Because the coverages are packaged into a single policy, CPPs are easier to manage, and they're usually more cost-effective than purchasing individual policies. 

Businesses can modify their CPP as they grow or their risks change. For example, if the business expands its operations and starts offering delivery services, the business owner can add commercial fleet protection to the policy. If the company is concerned about data privacy, the business can add cyber liability protection to its coverage. 

Which insurers offer CPP insurance 

Several major insurers offer CPP insurance, including the following: 

• AmTrust Financial: AmTrust has CPP options for a broad range of businesses, including restaurants, contractors and auto service businesses. 
• Berkley: Besides basic general liability and property protection, Berkley CPPs can include data breach and cyber liability, equipment breakdown and professional liability insurance. 
• Chubb: For mid-sized businesses, Chubb could be an excellent option. It has robust coverage options, and some businesses can even get quotes online (an unusual feature for CPP coverage). 
• Markel: Markel specializes in creating personalized insurance packages for a range of businesses, from daycare providers to pest control companies. 

Business owner’s policy vs commercial package policy

Both BOPs and CPPs provide bundled business insurance, but they differ in what's included and what businesses are eligible. 

BOPs are best for small businesses or solopreneurs with limited business risks. 

"For example, boutique shops or small offices usually don’t require the flexibility or broader coverage of a CPP," Texas General Insurance’s Schrader says. For those businesses, a BOP would be adequate.

CPPs are for small to mid-sized businesses with more complex operations and risks. Manufacturers, construction companies and wholesalers, for example, may benefit from CPP insurance. 

Is commercial package insurance the right choice for your business?

If you own a small to mid-sized business — or if your business is rapidly growing — a CPP may make more sense than a BOP. Businesses that have more risk exposure, such as those that transport goods or have a larger number of employees, will likely find CPPs provide more cost-effective coverage. 

If you aren't sure which form of coverage is right for you or what add-ons your business may need, consult with an insurance agent. An agent can discuss your business needs with you and identify potential risks so you can choose the right coverage. 

What our expert says

Q: What advantage does a CPP have over a BOP?

Nick Schrader Owner of Texas General Insurance.

"A BOP is a pre-packaged policy. It's mainly designed for small businesses with straightforward risks…. [CPPs] are well-suited for businesses that need coverage beyond what a BOP offers, such as higher limits or additional endorsements."