Commercial Multiple Peril (CMP) Policy

Commercial Multiple Peril (CMP) Policy

Investopedia / Mira Norian

What Is a Commercial Multiple Peril (CMP) Policy?

A commercial multiple peril (CMP) policy offers at least two forms of commercial insurance coverage, encompassing a variety of potential losses incurred from numerous causes. This type of policy essentially bundles together several property and general liability insurance policies types into a single one, covering multiple hazards.

For example, some of the types of coverage offered include business crime, business automobile, boiler and machinery, marine and farm, flood damage, wind damage, and general liability.

Key Takeaways

  • A commercial multiple peril (CMP) policy bundles together several property casualty insurance coverage types to create a convenient all-in-one package for the insured.
  • A commercial multiple peril policy is often available at a discount when compared to multiple separate policies.
  • A popular form of multiple peril coverage is multiple-peril crop insurance (MPCI) coverage, used by farmers and ranchers to protect against incidents that may lead to a loss of crops.

How Commercial Multiple Peril Policies Work

Commercial multiple peril insurance is the most popular type of commercial package insurance policy in the U.S. property and casualty insurance market. These policies are sold by property and casualty insurers to businesses of various types. They typically combine many different types of coverage under a single policy, creating a convenient all-in-one insurance coverage package for the insured. It is often available for a discount.

The commercial multiple peril policy is rated by applying factors known as package modifications at the end of the rating process. This permits the full coverage in the package to be analyzed in combination with results from the monoline coverage.

Examples of Commercial Multiple Peril Policies

Multiple Peril Crop Insurance (MPCI)

A popular form of multiple peril coverage is multiple-peril crop insurance (MPCI) coverage. Many farmers and ranchers purchase these policies for multiple forms of protection against incidents which may lead to a loss of crops. MPCI is a bundle of different policy options that covers loss of crop yields from drought, flood, excessive moisture, and all other natural causes. 

This type of coverage now allows for a combination of yield protection and price protection to further protect farmers from financial loss. It also acts as a credit enhancement for agricultural loans and provides farmers with peace of mind in case of natural disasters.

Multiple-peril crop insurance is actually a product of a public-private partnership between the government and 15 private insurance companies. In essence, the United States Department of Agriculture (USDA) Risk Management Agency oversees the issuance of MPCIs, along with mandating what rates can be charged and what kinds of crops are automatically covered in different parts of the country. Only the select group of insurance companies that are authorized by the USDA to sell MPCIs may handle the reinsurance and writing of the policies. They also adjust and process claims.

Other Commercial Multiple Peril Policies

Another example of a commercial multiple peril policy would be one that covers both flood damage as well as wind damage. These two types of coverage are commonly bundled together because a natural disaster that causes one loss is also likely to cause the other as well. For example, as the result of a tornado, there may be flood damage to your basement in addition to wind damage to your roof.

Types of Coverages Available in Commercial Multiple Peril Insurance

Commercial multiple peril insurance policies can include a wide range of insurance coverages that apply to a variety of business types. These include:

  • General liability
  • Product liability
  • Medical expenses
  • Building
  • Business and personal property
  • Equipment breakdown protection coverage
  • Business income and extra expense
  • Bailee coverage
  • Commercial crime
  • Employee theft and forgery
  • Spoilage coverage
  • Liquor liability coverage
  • Hired auto and non-owned auto liability
  • Barber shops and hair salons professional liability
  • Pharmacists/druggists
  • Beauty salons professional liability
  • Directors and officers liability
  • Ordinance or law coverage
  • Utility services