Insurance is all around us, everything can be insured for a price, but what does the term insurance actually mean? Investopedia defines it as
“A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company”.
For the customer it represents some kind of guarantee of financial compensation against loss. For the insurance company it’s all about risk, as far as they are concerned the higher the risk the higher the premium. This article is going to explore a particular type of business insurance.
The glossary of insurance defines commercial package insurance (CPI) as insurance which “provides both liability and property coverage for businesses and other organizations, the business dictionary expands this by stating it is “insurance that covers more than one perils, such as commercial property, commercial crime, commercial and general liability”.”
The big advantage of these policies is that policy holders can aggregate individual policies into a single insurance policy, which is then tailored to the needs of the individual business. The idea is that risk to the insurer is reduced which means a lower premium for the insured.
So how might a company set up a CPI? As stated above the policy is geared toward a given business so what might work for business A, may not work for business B. The point is that the overall CPI needs to suit the customer, let’s consider some examples. If you live in a house, even if it’s rented you should get some kind of contents cover, it is no different in the commercial sector. Suppose a high street clothes chain stores it’s mannequins, stock and other materials in a large out of town warehouse that is not owned by them, i.e. a third party owned. Imagine the whole building is destroyed in a fire, the CPI that the chain store has would need to cover any liability issues raised by the
third party owners of the warehouse, any business interruption caused by the loss of materials.
A second example, put your hand up if you have ever lost data on a computer? Keep your hand up if it wasn’t backed up! Suppose you are a charity fund raising agency and you have data concerning to supporter information, such as how long they have been giving financial support for and how much they have been giving over this time. This data is then lost which means it is impossible to start the fund raising campaign, without the data being reinstated, which of course means contacting the charities concerned. The organizations decide that they cannot wait for this to happen and take their business elsewhere. A CPI would need to cover the costs of losing the data and the financial cost of lost business.
A final scenario is that you are a small business and you own a storage unit on an industrial estate. Goods pertaining to your business are delivered out of hours and signed as safely received to the neighboring unit. There is break in or fire in this unit and all the items are destroyed or stolen. In this situation the CPI has to cover loss within say 250m or 500m of the location of the unit that you own, as well as losses due to interrupted business. These losses could be substantial as the goods may have to be remade, re-imported or are in some way critical to the daily functioning of your business
In conclusion, any business is eligible for CPI; the coverage includes almost all conceivable scenarios ranging from a broken boiler to professional liability and commercial crime, including car crime. In fact it is easier to say that the only coverage that CPI does not cover is any kind of marine or aviation insurance. This needs to be addressed separately.
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