Special Multiperil Policy (SMP)

Special Multiperil Policy SMP Insurance Coverage Business Insurance Liability Property Crime Boiler and Machinery
An overview of the Special Multiperil Policy (SMP), which offers comprehensive insurance coverage for large businesses across property, liability, crime, and boiler/machinery.
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Special Multiperil Policy (SMP)

A Special Multiperil Policy (SMP) provides comprehensive insurance coverage tailored for large businesses to protect against a range of risks. SMP typically includes four main areas: Property, Liability, Crime, and Boiler and Machinery Coverage.

Coverage Areas

Section I (Property)

  • Description: Covers the building(s) and contents either against any peril (all-risk basis) or only those perils listed in the policy.
  • Advantage: It’s advantageous for businesses to opt for an all-risk basis to ensure broader protection.

Section II (Liability)

  • Description: Covers the insured for actions or non-actions that lead to liability exposure due to ownership, use, possession, and/or maintenance of the insured locations and structures. It also includes activities conducted by the insured at or from these locations.

Section III (Crime)

  • Description: Provides coverage against various criminal activities including employee dishonesty, premises loss (inside and outside structures), forgery by depositions, counterfeit currency, and money orders.

Section IV (Boiler and Machinery)

  • Description: Covers explosions of boilers, engines, turbines, and pipes owned or controlled by the insured.

Examples of Applications

  1. Retail Chains: An SMP can be used by large retail chains to protect their numerous outlets against potential risks related to property damage, customer liability claims, employee theft, and equipment failures.
  2. Manufacturing Firms: A manufacturing company might use SMP to cover factory buildings, employee misconduct, liabilities from their products, and breakdowns in their machinery.

Frequently Asked Questions (FAQs)

  1. What is a Special Multiperil Policy (SMP)?

    • A Special Multiperil Policy offers comprehensive insurance covering property, liability, crime, and boiler/machinery for large businesses.

  2. Is SMP coverage limited to listed perils?

    • Coverage can be either all-risk or limited to listed perils, depending on the policy specifics.

  3. What does ‘all-risk basis’ mean under Section I?

    • It means that the policy covers any peril unless explicitly excluded, offering broader protection.

  4. Does SMP cover employee theft?

    • Yes, Section III (Crime) covers employee dishonesty and various other crime-related risks.

  5. Are machinery explosions covered under SMP?

    • Yes, explosions of boilers, engines, and other machinery under control of the insured are covered under Section IV.

All-Risk Insurance

  • Definition: Insurance policy that covers all perils except those explicitly excluded in the policy.

Liability Insurance

  • Definition: Provides coverage for bodily injury and property damage that the policyholder becomes legally liable to pay.

Property Insurance

  • Definition: Protects against risks to property, such as fire, theft, and some weather damage.

Crime Insurance

  • Definition: Covers losses due to criminal acts such as theft, burglary, and fraud.

Boiler and Machinery Insurance

  • Definition: Specifically insures against losses from mechanical failures or explosions of equipment.

Online References

Suggested Books for Further Studies

  1. “Risk Management and Insurance” by Scott E. Harrington & Gregory R. Niehaus
  2. “Principles of Risk Management and Insurance” by George E. Rejda & Michael McNamara
  3. “Insurance and Risk Management” by Janet K. Shim & Chris E. Neely
  4. “Fundamentals of Risk and Insurance” by Emmett J. Vaughan & Therese Vaughan
  5. “Commercial Property Insurance” by David MacGregor

Fundamentals of Special Multiperil Policy: Insurance Basics Quiz

### What is the purpose of a Special Multiperil Policy (SMP)? - [ ] To provide short-term insurance policies for small businesses - [x] To offer comprehensive coverage for large businesses - [ ] To cover individual health insurance - [ ] To provide automobile insurance exclusively > **Explanation:** The Special Multiperil Policy (SMP) provides comprehensive coverage tailored for large businesses, encompassing various types of risk protection in a single policy. ### Which section of SMP covers employee dishonesty? - [ ] Section I (Property) - [ ] Section II (Liability) - [x] Section III (Crime) - [ ] Section IV (Boiler and Machinery) > **Explanation:** Section III of the SMP covers crimes including employee dishonesty, premises loss, counterfeit currency, and money orders. ### What does 'all-risk basis' mean in the context of SMP's property coverage? - [x] Coverage against any peril unless specifically excluded - [ ] Coverage against only fire-related incidents - [ ] Coverage against peril listed in another policy - [ ] No coverage at all > **Explanation:** 'All-risk basis' means that the property is covered against any peril that isn’t specifically excluded in the policy, offering broad protection. ### What type of businesses would most benefit from a Special Multiperil Policy? - [ ] Small home-based businesses - [x] Large retail chains and manufacturing firms - [ ] Freelance professionals - [ ] None of these > **Explanation:** Large retail chains and manufacturing firms would benefit the most, as they possess significant assets and diverse risks that an SMP is designed to cover. ### Does Section II (Liability) of SMP cover liabilities arising from non-actions of the insured? - [x] Yes - [ ] No - [ ] Only for criminal negligence - [ ] Only if specified in court > **Explanation:** Section II of SMP covers liabilities arising from both actions and non-actions related to ownership, use, possession, and maintenance of insured locations. ### Which section of SMP covers equipment failure due to explosions? - [ ] Section I (Property) - [ ] Section II (Liability) - [ ] Section III (Crime) - [x] Section IV (Boiler and Machinery) > **Explanation:** Section IV (Boiler and Machinery) of SMP provides coverage for explosions of boilers, engines, turbines, and other machinery controlled by the insured. ### Does SMP include coverage for counterfeit currency? - [x] Yes, under Section III (Crime) - [ ] Yes, under Section I (Property) - [ ] No, counterfeit currency is excluded - [ ] Only if documented with police reports > **Explanation:** Section III (Crime) covers losses related to counterfeit currency, along with other crime-related risks. ### Are natural disasters covered under SMP's 'all-risk basis' property coverage? - [x] Yes, if not explicitly excluded - [ ] No, they are always excluded - [ ] Only if specified in an endorsement - [ ] Only flood incidents are covered > **Explanation:** Natural disasters can be covered under the 'all-risk basis' unless explicitly excluded in the policy. ### What is the main advantage of having an all-risk basis property coverage? - [ ] Lower premium costs - [ ] Limited scope of coverage - [x] Broader protection against unlisted perils - [ ] Simplified claims process > **Explanation:** The all-risk basis offers broader protection as it covers any peril unless specifically excluded, providing extensive coverage. ### Are legal expenses related to liability claims covered under Section II? - [x] Yes - [ ] No - [ ] Only if the claimant wins - [ ] Only for property-related claims > **Explanation:** Legal expenses arising from liability claims are typically covered under Section II, protecting the business against associated costs.

Thank you for exploring the Special Multiperil Policy (SMP) with us. Keep enhancing your knowledge to safeguard your business effectively!

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