Coverage partCommercial lines
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Drill15 items
Commercial package policy on the P&C exam
A commercial package policy (CPP) combines two or more commercial coverage parts under one set of Common Policy Declarations and Common Policy Conditions; a policy with one part is monoline. The conditions shared by every part sit on a single form, IL 00 17, and three of the six run through the first named insured.
How a package policy is assembled
Monoline or package
Each coverage part arrives complete: its own declarations, conditions, coverage forms and endorsements, and for property a causes-of-loss form as well. The common pieces at the bottom of the figure are written once and serve every part above them.
The Common Policy Declarations carry what every part shares: the named insureds and mailing address, the policy period, a description of the business, and the coverage parts included with their premiums. Limits, locations and deductibles live in each coverage part's own declarations.
Parts that can go into a CPP: commercial property, commercial general liability, commercial crime, inland marine, equipment breakdown, commercial auto and farm. Parts that cannot: workers compensation, surety bonds, most professional and D&O lines, and the businessowners policy, a prebuilt package of its own.
Interline endorsements amend more than one coverage part at once; the nuclear energy liability exclusion (IL 00 21) and the calculation of premium endorsement (IL 00 03) are two examples. An endorsement attached to a single part changes only that part.
Packaging also puts every part on one policy period and one first named insured. A change in the middle of the term, such as adding a location or a vehicle, arrives as an endorsement the insurer issues, and its premium is figured for the part of the term that remains.
The six Common Policy Conditions (IL 00 17)
| Condition | What it says | Who acts |
|---|---|---|
| Cancellation | Cancel any time by written notice; insurer gives 10 days for nonpayment, 30 days for any other reason | First named insured or insurer |
| Changes | Changed only by an endorsement the insurer issues | First named insured requests |
| Examination of books and records | Audit during the policy period and up to 3 years afterward | Insurer |
| Inspections and surveys | Inspect and recommend without becoming a safety guarantor | Insurer |
| Premiums | Pays premium and receives return premium | First named insured |
| Transfer of rights and duties | Needs the insurer's written consent, except on the death of an individual named insured | Insurer consents |
Premium for a location added midterm
WorksheetPro rata share
A second location, rated at $3,650 a year, added by endorsement 73 days into a one-year term
- Annual premium for the location
- $3,650
- Policy term
- 365 days
- Days already elapsed
- 73
- Days the location is covered365 − 73292
- Share of the term292 ÷ 3650.80
- Additional premium0.80 × $3,650$2,920
Charged to the first named insured$2,920
The endorsement changes the policy, and the first named insured pays for it. A location removed midterm runs the same arithmetic the other way, as a return of premium.
Assembling a package for a contractor
Choose the coverage parts
Commercial general liability for the operations, inland marine for contractors equipment, commercial auto for the trucks.
Complete each part
Each part gets its own declarations with its limits, plus its conditions, coverage forms and endorsements.
Add the common pieces
One set of Common Policy Declarations and Common Policy Conditions, and any interline endorsements, serve all three parts.
Write workers compensation outside
It is never a coverage part; it goes on its own policy, as workers compensation explains.
Conditions, parts and the first named insured
0 of 15 answered · 0 right
Recall carries this part: the six conditions, what may be packaged, and who holds the policy's rights.
Notes on each optionCommit to an answer first. The notes under the item then open on every option: what rules it in or out, and the one word that splits the runner-up from the key.
- Item 01
Which item appears on the Common Policy Declarations of a commercial package policy?
- AThe causes of loss form for each location is shown in the commercial property declarations.
- BCorrect: the Common Policy Declarations list the named insured, mailing address, policy period, coverage parts and premiums.
- CCoinsurance percentages are shown in the commercial property declarations.
- DThe CGL occurrence limit is shown in the CGL declarations.
- Item 02
Which combination can be written as a commercial package policy (CPP)?
- AA single coverage part is a monoline policy; a CPP needs two or more parts.
- BCorrect: a CPP combines the common declarations and conditions with two or more coverage parts, such as property and CGL.
- CWorkers compensation can't be a coverage part of a CPP.
- DThe BOP is its own package and can't be a coverage part of a CPP.
- Item 03
Under the Common Policy Conditions (IL 00 17), which action requires the insurer's written consent?
- AThe first named insured may cancel at any time by written notice; no consent is needed.
- BInspections are the insurer's own right, not something requiring its consent.
- CDeath of an individual named insured is the one exception where rights pass without consent.
- DCorrect: the Transfer of Rights and Duties condition bars transferring the policy without the insurer's written consent.
- Item 04
Which of the following can NOT be written as a coverage part of a commercial package policy?
- ACommercial crime is an available CPP coverage part, so it isn't the NOT answer.
- BCommercial inland marine is an available CPP coverage part, so it isn't the NOT answer.
- CCorrect: a surety bond is a three-party guarantee, not an insurance coverage part, so it stands outside the CPP.
- DCommercial auto is an available CPP coverage part, so it isn't the NOT answer.
- Item 05
An insurer's loss control representative inspects a warehouse insured under a commercial package policy and recommends changes. Under the Common Policy Conditions, which statement about the inspection is CORRECT?
- AThe condition expressly says the insurer doesn't warrant that conditions are safe or meet codes.
- BThe insurer may inspect, but the condition says it isn't obligated to.
- C'Automatically voids' overreaches; nothing in the condition voids coverage for ignoring advice.
- DCorrect: under the Inspections and Surveys condition, any inspection relates only to insurability and premiums.
- Item 06
In a commercial package policy, which document can change the terms of more than one coverage part at once?
- AA causes of loss form belongs to the commercial property coverage part only.
- BCorrect: an interline endorsement, such as the nuclear energy liability exclusion, modifies several coverage parts at once.
- CA coverage form belongs to a single coverage part.
- DThe Common Policy Conditions set duties for all parts but don't change coverage terms.
- Item 07
Which statement correctly contrasts a businessowners policy (BOP) with a commercial package policy (CPP)?
- AThis reverses the two: the BOP builds business income in, while the CPP needs a separate form.
- BThe BOP doesn't need a separate business income form; the coverage is built in.
- CCorrect: the BOP includes business income on an actual-loss-sustained basis, while a CPP needs a business income coverage form such as CP 00 30.
- DBoth can cover business income; the difference is how it is added.
- Item 08
Under the Common Policy Conditions of a commercial package policy, which party may cancel the policy at any time by giving written notice to the insurer?
- AThe producer isn't a party to the contract and can't cancel it.
- BCorrect: the Common Policy Conditions give the right to cancel only to the first named insured.
- CA mortgageholder is entitled to notice of cancellation but can't cancel the policy.
- DOther named insureds can't cancel on their own, which is the usual trap.
- Item 09
Under the Common Policy Conditions (IL 00 17), the insurer may examine and audit the insured's books and records during the policy period and for how long afterward?
- ACorrect: the Examination of Your Books and Records condition allows audits during the policy period and up to three years after it ends.
- BSixty days is too short and is confused with ERP and post-cancellation windows.
- COne year is too short and is confused with crime discovery periods.
- DFive years is the claims-made BERP tail, not an audit period.
- Item 10
Under the Common Policy Conditions (IL 00 17), how much written notice must an insurer give the first named insured to cancel a commercial policy for nonpayment of premium?
- ASixty days isn't a cancellation notice period in IL 00 17.
- BTwenty days is the personal auto nonrenewal notice, not the commercial nonpayment rule.
- CThirty days is the IL 00 17 notice for cancellation for any reason other than nonpayment.
- DCorrect: IL 00 17 requires 10 days' written notice to the first named insured for cancellation for nonpayment.
- Item 11
A commercial package policy lists three named insureds. Under the Common Policy Conditions, who is responsible for paying the premium?
- ACorrect: IL 00 17 makes the first named insured responsible for paying premiums and the one who receives return premium.
- BThe size of a location has nothing to do with the premium duty.
- CThe insurer can't pick; the premium duty belongs to the first named insured.
- DThere is no pro rata split; other named insureds have no premium duty.
- Item 12
Under the Common Policy Conditions of a commercial policy, the insured's rights and duties may be transferred without the insurer's written consent only:
- AA family member gets no exception; any transfer needs the insurer's written consent.
- BTime in force doesn't matter; transfer still requires written consent.
- CA sale of the property is exactly the situation that requires the insurer's consent.
- DCorrect: the one exception is the death of an individual named insured, when rights pass to the legal representative.
- Item 13
Midway through the term, an insurer cancels a commercial package policy for a reason permitted by the Common Policy Conditions. How is the return premium calculated?
- ACorrect: when the insurer cancels under the Common Policy Conditions, the refund is pro rata, returning all unearned premium.
- BA minimum earned premium is a floor on what the insurer keeps, not a refund method.
- CA flat cancellation happens only at inception, not midway through the term.
- DShort-rate can apply when the first named insured cancels, not when the insurer does.
- Item 14
A commercial crime coverage part is attached to a commercial package policy. How much written notice must the insurer give to cancel for a reason other than nonpayment of premium?
- A10 days is the notice for nonpayment of premium, not other reasons.
- BCorrect: the Common Policy Conditions require 30 days' written notice to cancel for any reason other than nonpayment.
- C60 days is not a notice period in the Common Policy Conditions, which use 10 days for nonpayment and 30 days for any other reason.
- D20 days is the personal auto notice figure, not the commercial cancellation rule.
- Item 15
Which of the following is NOT included in the Common Policy Conditions of a commercial insurance policy?
- ACorrect: coverage parts are the building blocks of the CPP, not one of the Common Policy Conditions.
- BChanges is one of the Common Policy Conditions, so it cannot be the NOT answer.
- CInspections and Surveys is one of the Common Policy Conditions, so it cannot be the NOT answer.
- DPremiums is one of the Common Policy Conditions, so it cannot be the NOT answer.
Package policy edge cases
Does a package need more than one coverage part?
Yes. One coverage part under the common declarations and conditions is a monoline policy; the package starts at two. A businessowners policy is a separate prebuilt program on its own form (BP 00 03), not a CPP with fewer parts.
Can the parts in one package carry different limits and deductibles?
Yes. Each coverage part's own declarations set its limits, deductibles and covered locations; only the common declarations, the common conditions and any interline endorsements are shared.
Which auto form goes into a package?
The business auto coverage form, with its covered auto symbols, as the commercial auto coverage part; see commercial auto for how the symbols work.
Does the 10-day and 30-day rule also govern nonrenewal?
No. IL 00 17 sets notice for cancellation only. Nonrenewal notice comes from state law, which the general block leaves to the state portion of the exam.