Special Multi-Peril Policy
What Does Special Multi-Peril Policy Mean?
A Special Multi-Peril (SMP) policy is a type of commercial insurance that provides coverage for both property loss and liability. The extent of coverage depends on the specific SMP policy purchased by the insured or the customizations specified during the purchase from the insurer.
Insuranceopedia Explains Special Multi-Peril Policy
Instead of purchasing separate policies for property insurance (to cover property damage or loss) and liability insurance (to address legal and monetary obligations to third parties), individuals or organizations can opt for a Special Multi-Peril (SMP) policy. An SMP provides coverage for both property loss or damage and liability. Due to its broad scope, an SMP is considered a package policy, meaning it combines multiple types of coverage into a single policy. Additionally, SMPs are often offered at a discounted rate, making them more cost-effective compared to purchasing several standalone policies.
SMPs are generally categorized into two types: the named peril form and the all-risk form. The named peril form explicitly lists the risks or perils it covers, whereas the all-risk form offers broader coverage. However, broader coverage does not necessarily make the all-risk form a better option. Some risks included in the all-risk form might be irrelevant to certain businesses. Moreover, the all-risk form includes several exclusions.
At an additional cost, insured parties may opt to include coverage for specific exclusions. For example, property damage caused by earthquakes is typically excluded. To address this, the insured might require an earthquake endorsement, which ensures coverage for renovations resulting from earthquake damage.
