Member's Area

Office & Shop

Office & Shop

Intro

Package Policies - Core Cover

Core Cover 1 - Property Damage

Core Cover 2 - Business Interruption

Core Cover 3 - Liability

Exclusions

Core Cover: Tailored

Office Policies

Shop Policies

Additional Services

INTRO

Commercial Package Policies are marketed under a variety of trade names.  These policies are designed to provide a range of covers automatically for particular trade sectors, e.g. shops and offices. The packaging has been carefully researched so that the majority of those in the particular trade are catered for. 

Here we will look into Package Policies specifically for;

  • Shops
  • Offices

PACKAGE POLICIES – CORE COVER

All commercial package policies will include core cover which can be tailored to suit the particular insurance needs of different types of business.

The typical commercial package policy will always include cover for:

  • property damage (including theft, money and glass)
  • business interruption
  • employers', public and products liability insurance

CORE COVER 1 – PROPERTY DAMAGE

The property damage section of the commercial package policy includes cover for almost everything in the trade premises, including fixtures and fittings and internal decorations for which the insured is responsible as tenant. The contents sum insured is selected by the insured, subject to a maximum figure of between £200,000 and £500,000.

Cover for the buildings can be added if the insured is the owner of the premises. The buildings (where insured) and contents cover automatically includes:

Automatic reinstatement of the sum insured following a claim

The sum insured is automatically reinstated rather than being reduced by the amount of a claim. The insurer will generally reserve the right to charge an additional premium for this.

Professional fees

Professional fees, such as architects', surveyors' and consultants' fees, incurred in the reinstatement of the property are covered. The insured must allow for these when calculating the sum insured.

Debris removal

The additional costs may be incurred in shoring up or demolishing partly damaged buildings or removing debris from the site of any damage are covered.

European Union and public authorities clause

This clause provides for the additional costs resulting from the need to rebuild elsewhere, or in a different way, as required by European Union legislation, Act of Parliament or bye-laws of any public authority.

Capital additions

This clause provides automatic cover for any additions or alterations to the buildings, tenant's improvements or general contents. A limit of 10% of the relevant sum insured (and a maximum amount of £500,000) applies.

The property damage cover is usually arranged on an all risks basis (see below), with the contents sum insured selected by the insured.

The theft cover usually requires 'violent and forcible entry to or exit from the premises', although 'full' theft cover without this restriction may be available for office risks (e.g. where entry is gained through an open window). 

Cover may also be restricted for target stock, (see below)

Trade contents are insured on a replacement as new basis.

All risk basis

Cover is usually for any loss of or damage to property, provided that it has occurred accidentally so far as the insured is concerned, and that the cause is not excluded by the policy wording.

Alternatively, some insurers provide what is effectively the same cover, but by building up the cover by adding different perils.

Target stock

Goods that present a high risk of theft.

These goods are usually relatively small in volume and high in value, not easily traceable, and/or with a ready second-hand or 'black' market available.

It usually includes commodities such as wines, spirits and cigarettes and tobacco, but may also include items such as audio visual equipment, jewellery and precious metal/stones and photographic equipment.

Typically, cover is provided up to £1,000 for wines and spirits and £1,000 for cigarettes and tobacco. These limits can usually be increased, subject to an additional premium.

The risks covered under the property damage section of the cover also include:

  • Money - cover is provided on an 'all risks' basis in respect of loss or destruction of or damage to money (please see below), both in transit and on the insured premises, subject to policy limits that vary between insurers
  • Personal accident/assault - this cover provides monetary compensation (please see below) to the principal or employees if they are assaulted by thieves
  • Glass - cover is provided on an 'all risks' basis for damage to all forms of fixed glass,(please see below)

Money

The term 'money' will be defined in the policy and will have a wide meaning. It will include items such as cash, bank and currency notes, cheques, postal and money orders, postage stamps, national insurance cards and luncheon vouchers.

It is usual for cover to also include: 

  • damage to safes
  • loss or damage to clothing and personal effects belonging to the insured or their directors, partners or employees (subject to a limit of typically £250–£500 per person).

Monetary compensation

Compensation is in the form of a lump sum of £10,000 in the event of death, loss of limbs or permanent total disablement.

A weekly benefit of £100 per week for a maximum of 104 weeks is paid in the event of temporary disablement.

Cover is also included for damage to clothing and personal effects of employees attacked in the course of a robbery, up to a sum insured of £500.

Fixed glass

For example in windows, doors and signs, and sanitary fittings.

The cost of temporary boarding up and damage to frames and lettering is also included.

A sum insured of £500 and an excess of £100 usually applies.

CORE COVER 2 – BUSINESS INTERRUPTION

The business interruption section of a commercial package policy automatically includes cover for both loss of earnings and the increased cost of working to avoid a loss of earnings when damage has occurred to the contents of trade premises.

Cover may be on:

A gross profit basis 

This is suitable for a business, such as a shop, which is retailing goods involving sales, purchases of goods and opening and closing stock. Gross profit is normally calculated by deducting any 'uninsured working expenses' (those which will not change following the loss) from the income of the business, adjusting this figure for opening and closing stock.

Calculating the exact loss of gross profit is not easy and nowadays many insurers offer a simplified version of the traditional gross profit wording, referred to as a 'net sales' basis. This provides cover for the difference between sales income and the cost of purchases, rather than requiring a full gross profit calculation.

A gross fees or income basis 

This is suitable where the business provides a service rather than a product and charges a fee for that service.

The business will purchase very little in the way of stock, and cover is, therefore, provided for the reduction in income to the business.

An increased cost of working only basis

For office risks, there is usually the option to insure 'increased cost of working' only (e.g. the business continues to function as normal but incurs extra costs in hiring a temporary office space and suitable equipment while its own premises are being rebuilt).

Like the property damage section, cover is on all risks basis and the same exclusions apply.

Other key features of the business interruption cover include:

  • cover is subject to a material damage warranty, (see below) which requires that property damage cover is in place to replace the damaged property, such as trade contents
  • cover is restricted to a standard maximum indemnity period (see below)
  • there is a standard sum insured, which is a multiple of the contents sum insured or a fixed sum
  • standard extensions to cover (see below) are included for suppliers, public utilities, denial of access and murder or suicide, although these are subject to set limits.

Material damage warranty

The material damage warranty protects insurers by ensuring that there are sufficient funds to repair, rebuild or replace any property damaged, thus reducing the likely length and size of any business interruption claim.

Maximum indemnity period

A maximum indemnity period of 12–36 months usually applies. This is the maximum period for which cover is provided following a loss.

Extensions to cover

Cover is extended to include loss of business income as a result of:

  • damage at supplier's premises
  • damage at public utilities supplier's premises
  • denial of access to the premises following damage to other premises in the vicinity
  • murder, suicide or notifiable disease at the premises or within a specified radius of them
  • damage to documents in transit

Each extension is subject to an individual limit of liability.

CORE COVER 3 - LIABILITY

We will now look at the key features of the 'core cover' for public, products and employers' liability insurance.

The public liability section provides up to, typically, £2 million of cover in respect of the insured's legal liability to pay compensation to third parties injured, or whose property is damaged, as a result of business operations. The legal costs of both parties are included.

Cover is included for:

  • legal costs and expenses in defending prosecutions under relevant Health and Safety Legislation
  • loss or damage to premises rented or hired by the insured.

Liabilities arising from work which takes place away from the insured's premises (other than clerical, collection, or delivery work) may be excluded depending on the trade.

The products liability section covers the insured's legal liability to pay compensation to third parties injured, or whose property is damaged, by a defective product, sold or supplied by the insured.

The indemnity limit is usually £2,000,000 for the public liability section, and again the cover will include legal costs and expenses. However, the limit applies to any one period of insurance as well as to any one occurrence.

EXCLUSIONS

The principal exclusions which apply to the public and products sections of cover include:

  • liabilities arising from motor vehicles, aircraft or watercraft (these should be insured separately)
  • liability for loss of or damage to property in the custody or control of the insured
  • the cost of rectifying defective work/products
  • the cost of recalling, replacing or repairing products supplied
  • professional negligence
  • pollution and contamination
  • contractual liability
  • penalties, fines or punitive damages

Some insurers also exclude liability arising from products exported to the USA or Canada.

The final category of liability insurances which is covered as part of the 'core cover' under a commercial package policy is employers' liability.

This type of insurance is compulsory by law and it covers the insured's legal liability to pay compensation to employees injured at work, including the legal costs of both parties.

All employees are covered without the insured having to specify these or their wages and a policy limit of £10,000,000 usually applies. However, offshore work is excluded.

Policy limit of £10,000,000

The legal requirement of cover is £5,000,000, but insurers generally provide more than this, except for liabilities arising from acts of terrorism, where only the legal requirement applies.

CORE COVER: TAILORED

We will now move on to look at how the policy wording for a commercial package policy is tailored to meet the needs of a particular trade.

The policy wording for the different types of package policy is tailored to meet the needs of a particular trade, through the inclusion of specific extensions to the 'core cover'.

Here we will look into

  • Office policies and
  • Shops policies.

OFFICE POLICIES

In addition to the 'core cover', office policies include several types of insurance which are relevant to this type of business.

Goods in transit

This provides cover for the loss of or damage to goods while they are in transit from one location to another. Sums insured range between £2,000 and £2,500.

Loaded vehicles must be locked when unattended and garaged overnight. Some insurers exclude losses from unattended vehicles completely.

Temporary removal of contents

This covers contents temporarily away from the office, such as at an employee's home or in transit.

The maximum sum insured is usually £25,000.

Temporary removal of documents

Business documents are covered whilst they are temporarily removed from the business premises within Great Britain.

The sum insured is usually between £1,000 and £10,000.

Damage to external blinds and signs

The sum insured is usually between £500 and £1,000 and neon signs are excluded.

Replacement of locks and keys following theft

The sum insured is usually between £500 and £1,000.

Loss of accounts receivable

Cover for money that is owed by customers, which cannot be traced and, therefore, cannot be collected because the records have been lost or damaged by an insured peril.

The sum insured will be between £25,000 and £50,000.

Cover excludes mislaying or misfiling and deliberate falsification of records.

Freezer contents

Loss of freezer contents following accidental change in temperature.

The sum insured is £2,000.

Rent liability

This covers the businesses' continuing liability to pay rent even if the premises are damaged (if the premises are rented).

Cover is usually provided for 25% of the contents sum insured for up to 2 years, although some insurers specify a sum insured.

Cover applies from the date of damage until the time when the premises are capable of being occupied.

Damage to property at exhibitions

The sum insured is £2,000.

There are also a number of optional extensions available to office policyholders.

These include:

Buildings

Cover can be extended to cover the cost of rebuilding the premises, where these are owned rather than rented. Cover is usually on an all risks basis, with the option to include subsidence.

Fidelity Insurance

This is also known as 'theft by employee' or 'employee dishonesty insurance'.

Cover is provided against the risk of losing money or stock due to the fraud or dishonesty of an employee, subject to a sum insured of typically between £5,000 and £25,000 for any one event.

Cover typically excludes losses caused by employees who are known to have been previously dishonest, consequential losses, penalties and fines and losses discovered within 7 days.

Portable Equipment

Portable equipment that will be used away from the premises is covered on an 'all risks' basis anywhere in the UK, and for up to 30 days elsewhere in the world. Some insurers provide unlimited worldwide cover.

Cover is subject to a sum insured of up to £25,000.

Terrorism

Covers the business against the effects of acts of terrorism.

Computer breakdown

Breakdown cover for computer equipment at the business premises in the UK.

Cover is included for reinstatement of data of between £5,000 - £10,000, and increased cost of working of between £10,000 - £25,000.

Cover typically excludes losses covered by a maintenance, guarantee, hire or lease agreement, wear and tear, and computers over 10 years old.

Legal expenses

Breakdown cover for computer equipment at the business premises in the UK.

Cover is included for reinstatement of data of between £5,000 – £10,000, and increased cost of working of between £10,000 – £25,000.

Cover typically excludes losses covered by a maintenance, guarantee, hire or lease agreement, wear and tear, and computers over 10 years old.

Business travel

Provides cover for the principal and employees whilst travelling on business.

Typical policy cover and limits are medical expenses £1,000,000, personal liability £1,000,000, cancellation costs £2,000, personal baggage £2,000 and money £1,000.

Cover typically excludes persons over 75 years, anyone travelling against medical advice, hazardous activities and losses not reported to the local police.

Personal accident

24 hour cover for the principal and employees for accidental bodily injury resulting in death, permanent or temporary disablement.

Cover can be purchased in units of cover with each unit giving lump sum benefits of £5,000 and weekly benefits of £25 per week.

Cover typically excludes suicide or deliberate exposure to danger, the effects of alcohol or drugs, pregnancy or childbirth and hazardous activities.

SHOP POLICIES

In addition to the 'core cover', shop policies include several types of insurance which are relevant to this type of business.

  • damage to external blinds and signs
  • replacement of locks and keys
  • loss of accounts receivable
  • freezer contents
  • rent liability
  • damage to property at exhibitions
  • goods in transit (note however: for cover to operate the shops policy requires the goods to be in transit in the UK, whereas the office policy does not have this limitation).

In addition, a shops policy has seasonal increase in stock (please see below) automatically included within its cover.

Seasonal increase in stock

The stock sum insured automatically increases at certain times of the year, such as immediately before and after Christmas.

The cover is usually increased by between 25% and 50% of the stock sum insured.

The following extensions (some of which you saw were available to office policies) are also available as optional extensions to shops policies:

  • buildings
  • fidelity insurance
  • terrorism
  • computer breakdown
  • legal expenses
  • personal accident

In addition under a shop policy, cover is available for loss of licence.(see below) 

Loss of licence

Cover is provided for the reduction in the insured's financial interest in the premises or in the business as a result of non-renewal or withdrawal of a licence due to causes beyond the insured's control. A sum insured of £100,000 applies.

ADDITIONAL SERVICES

Non-insurance services

Finally, note that with all policies, to maintain their competitive position, insurers have additionally introduced non-insurance customer benefits into their policies, including:

Helplines

Helplines are available for legal advice, tax advice and emergency assistance.

Many of these are available 24 hours a day, 365 days a year.

Counselling service

Counselling services are available to the insured and their staff to help them deal with issues such as bereavement, divorce or bullying at work.

Claims line

Claims lines enable claims to be reported 24 hours a day, usually by means of a freephone telephone number.

Authorised repairers and suppliers

This includes, for example, a 24 hour glass replacement service in the event of a claim.

In addition, the facility may be available to purchase a range of fire and security products at discounted rates.

Risk control advice

Insurers are able to give the customer a range of risk control advice, including health and safety, fire protection and security. Often this is provided by insurers themselves, but where the risk control advice that is needed is more complex, insurers have links to specialist firms who will can offer such guidance, often for a fee.

As can be seen, there is no such thing as a 'standard package policy', but you can see how the most commonly found features of policy cover can be grouped together and then tailored to cover the needs of a particular trade.

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D Mackichan

Office & Shop

Different types of business have different strengths and characteristics but also different insurance requirements. If your business is an office or shop, you could benefit from a handy Office Insurance or Shop Insurance package.

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