Most businesses buy their first insurance as a package: a bundle of standard covers, at standard limits, priced for a straightforward trade. Most businesses that grow eventually need something else, a commercial combined policy, and the move between the two is not often explained. This article sets out what each one is, the signs a business has outgrown its package, and how the move actually happens.

What a package policy is

A package policy is built for volume. The insurer decides in advance which covers a shop, office, salon or small contractor typically needs, sets standard limits for each, and prices the bundle so it can be bought quickly, often online. Contents up to a set figure, public liability at two or five million, employers’ liability, money cover, perhaps some business interruption on a simple basis. For the trades these policies are designed around, they work well: a product built for a defined shape of business.

What commercial combined insurance is

A commercial combined policy starts from the opposite end. Instead of a preset bundle, it is assembled section by section around one business: material damage on the buildings, plant and stock you actually hold, at values you declare; business interruption sized against your gross profit and your realistic recovery time; liability sections at the limits your contracts require; and additional sections, goods in transit, money, specified machinery, added where the business needs them. Nothing is included by default and nothing is capped at a limit chosen for somebody else’s trade.

The signs a business has outgrown its package

In our experience the move becomes worthwhile when two or more of the following are true.

• Stock moves with the season. A package carries one flat contents or stock limit. A business whose holding doubles before its peak trading period is potentially underinsured for exactly the weeks it can least afford to be.
• Machinery has real lead times. Standard limits rarely reflect what specialist plant costs to replace, and standard business interruption periods rarely reflect how long replacement takes to specify, ship, install and commission.
• Contracts set your limits for you. Customers, landlords and principal contractors increasingly specify liability limits as a condition of trading. When a contract demands more than the package can offer, the package has made the decision for you.
• There is more than one premises. Packages are built around a single location. Second sites, stock at third-party warehouses and goods moving between them all sit more naturally in a combined policy.
• The interruption would outlast the cover. If a serious loss would genuinely take longer to recover from than the package’s indemnity period allows, the shortfall lands entirely on the business.

What changes when you move

Four things, mainly. First, the questions get harder, in a useful way: a combined policy is only as good as the values declared into it, so the process forces a business to establish what its property would actually cost to reinstate and what its gross profit, on the insurance definition, actually is. Second, the policy becomes negotiable: wordings, excesses, conditions and extensions can be argued, which is where an independent broker earns their place. Third, commercial combined risks are more often reviewed and assessed individually by underwriters who want to understand the business behind the proposal, which is an opportunity: the best features of your business, its security, its housekeeping, its risk management, can be shown to the underwriter, who will price accordingly. Fourth, larger combined risks are usually surveyed, and the survey, handled well, works in the policyholder’s favour rather than against it.

How the move happens

The usual sequence is a review of the current package against the business as it now trades, a decision on what the combined programme should contain, presentation to the market, and a switch either at renewal or mid-term where the case justifies it. The review is the valuable part even if the answer turns out to be that the package still fits: a business that checks is in a different position from one that assumes.

Daines Kapp arranges both packages and commercial combined programmes, for businesses from first policy to large multi-section programmes. If you are unsure which side of the line your business now sits on, our commercial combined insurance page explains the cover in detail, or speak to the commercial team for a review.