Business Insurance: Commercial versus Packaged Policies

By Compuquotes Team on April 21st, 2008

Business Insurance

For many small businesses, insurance is a necessary evil. Although there are hundreds of other things that business owners would rather spend the money on, they understand and appreciate the need for having insurance. None-the-less, there is always the temptation to cut insurance corners in order to save money. The reduced cost is typically why small business owners gravitate toward packaged policies. Yet, there are advantages and disadvantages with these refined policies.

Again, the most obvious benefit to these packages is their cost. Packaged policies are generally much cheaper than commercial policies. The price comparison will vary depending on the type of package chosen. Yet, for a small business, gaining a business owners policy versus obtaining the general liability, property, and auto could save hundreds.

The greatest disadvantage would be more narrowly defined coverage. Packaged policies typically cover fewer events than commercial coverage. The policies are written to address the risk of a particular niche business segment. So, there is the potential for gray area claims to fall outside a packaged policy's coverage. Also, if your small business has multiple functions that are different in nature, you may find it hard to find a packed policy to encompass all of your risks. Yet, depending on the agent, you may be able to incorporate these gray areas. Packaged policies have the ability to be a little more flexible. If a need presents itself for a particular niche market, there is a good chance that the package policy can be adapted to satisfy that particular risk.

Small business owners and nonprofits have a good chance of finding a packaged policy for their particular niche market. There a lot of packaged policies out there and many of which are named for the particular business that it protects. So, this will eliminate the amount of time needed for matching your organization's particular risks with actual policies, unless you have a small business that offers a service that it relatively new. These businesses are usually guided toward a business owner's package, which may or may not be what you need. Other common and popular packaged policies include landlord policies and church policies.

However, specialty policies are usually not included in packaged policies. So, if you need professional liability, sexual and physical abuse, cyber, or directors and officer's liability, you may still need to purchase the policies separately. Unlike a commercial general liability policy, which would allow you to add or include these additional forms of protection.

Be prepared to explain your coverage and request copies of your declaration pages and policy. The commercial lines are generally the ones most are comfortable with, and businesses may be a little bit hesitant to work with you until they have a better grasp of your coverage. This is especially true when working as a vendor or contractor to a government entity.

There are strengths and weaknesses to packaged and commercial policies. Although many small businesses will base their final decision will be based on their costs, owners should realize that the cheapest coverage might not necessarily be the best coverage.

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