Legal Definitions - package policy

A package policy is a single insurance contract that combines several different types of coverage, which would typically be purchased as separate policies, into one comprehensive plan. This approach often offers policyholders convenience by consolidating multiple coverages under one policy and may result in cost savings compared to buying each coverage individually.

• Example 1: Homeowner's Insurance Policy

  A homeowner purchases a standard homeowner's insurance policy for their new house. This single policy typically includes coverage for damage to the physical structure of the home (like from fire or storms), liability protection if someone is injured on their property, and coverage for their personal belongings inside the house (such as theft or damage to furniture and electronics).

  This illustrates a package policy because it bundles multiple distinct types of insurance—property damage, personal liability, and contents protection—into one convenient contract, rather than requiring the homeowner to buy separate policies for each risk.

• Example 2: Business Owner's Policy (BOP)

  The owner of a small bakery needs insurance to protect their business. They opt for a Business Owner's Policy (BOP). This single policy covers damage to the bakery building and its equipment (like ovens and display cases), provides general liability insurance for incidents such as a customer slipping and falling, and includes business interruption coverage, which helps replace lost income if the bakery has to temporarily close due to a covered event.

  This is a classic example of a package policy, as the BOP combines essential property insurance, general liability, and business interruption coverage into one streamlined policy specifically designed for small to medium-sized businesses.

• Example 3: Commercial Package Policy (CPP) for a Manufacturing Company

  A mid-sized company that manufactures custom furniture needs extensive insurance for its operations. They secure a Commercial Package Policy (CPP) that includes commercial general liability coverage (for third-party bodily injury or property damage), commercial property insurance for their factory building and machinery, and commercial auto insurance for their fleet of delivery trucks.

  This demonstrates a package policy because the manufacturing company can combine several crucial commercial coverages—liability, property, and auto—into one overarching policy, simplifying their insurance management and often leading to more favorable rates than purchasing each coverage separately.