What is a Business Owners Policy
A Business Owners Policy (commonly referred to as a BOP) is a package of essential insurance coverages, generally intended for small to medium-sized companies. It covers any buildings or equipment you own and provides basic liability insurance to protect your business financially in the event of a lawsuit. BOP can also help you maintain your income if a fire or other incident interrupts your business.
A BOP offers a simplified and affordable way of getting insurance for your business. Packaging these coverages together means a BOP is usually a more affordable way to go than buying these important coverages separately. Additionally, a BOP can often be supplemented with other coverages to help you address more unique insurance needs, or to address needs that develop as your business grows and evolves.
What is covered under a business owner's policy?
A BOP has three primary coverages:
- Business property coverage — If your business is damaged due to a fire, storm or other incident, this coverage ensures you’re reimbursed for the costs to repair or replace damaged buildings, furniture, electronics and other equipment.
Most BOPs include what’s known as “named-peril” business property coverage. This means it provides coverage only for specific events named in the policy contract (common named perils include fire, explosion, wind damage, vandalism or smoke damage). If you feel your business needs coverage for more types of events, look for a BOP that offers “open-peril” business property coverage — but beware it will likely cost more.
- Business interruption coverage — If the operation of your business is disrupted due to a fire, storm, or other incident, this coverage ensures you’re reimbursed for loss of income. It also helps cover expenses related to operating out of a temporary location. So, for example, say you own and operate a florist shop that’s damaged by fire, and the repairs to the business will take four months to complete. Your business interruption coverage will reimburse you for your lost income during that time.
- General liability coverage — If your business is held responsible (liable) for customer injury or property damage caused by trips and falls, product mishaps, faulty installations or other errors, this coverage provides reimbursement for the injured person’s medical treatment, or to replace or repair damaged property. General liability may also protect you financially if you’re sued over an advertising injury, such as a copyright infringement.
A BOP can be customized to meet more specific needs of your business. Insurers typically offer endorsements (add-on coverages) to protect your business from costs related to repair or replacement of property that’s damaged in transit, equipment breakdown, spoilage of perishable items due to an equipment malfunction, or employee theft.
Should your business consider a BOP?
Your business likely needs insurance, especially if you own or rent a workspace, own other business property (ranging from tech to warehouse equipment), and if your employees interact with the public. Insurance protects your business from devastating financial losses related to customer injuries and lawsuits, burglaries, and storm and fire damage.
Aside from being prudent from a risk management perspective, insurance might be required to get a loan from a bank, or to get contracts from certain clients.
So if you’re looking for a simplified and affordable way to get essential coverages, and your business meets certain criteria, a BOP might be right for you.
BOP eligibility: some general guidelines
BOPs are usually limited to businesses that meet certain criteria, including business location, size, revenue and business class. In general, businesses best suited for a BOP include those that:
- Are in a low risk industry
- Have 100 or fewer employees
- Have less than $1 million in annual revenue
- Occupy just a small commercial space
- Require 12 or fewer months of business interruption insurance
Specific criteria vary by insurance company, so shop around to see if there’s a policy available to you. If your business falls well outside of these criteria, your best bet is to discuss your needs with a licensed insurance agent.
Purchasing a BOP
BOPs are available from a wide range of commercial insurance companies such as CoverWallet, which happens to offer a free quote. The cost can vary widely, depending on the type and size of your business and its coverage needs. One estimate puts the premium range at $500 to $2,000 per year.
Will I need other types of business insurance?
As stated above, a BOP is a package of essential coverages for a small business, and these coverages can be supplemented with endorsements. While this may work for many small businesses, others will have additional insurance needs and require additional policies. These can include any of the following.
- Professional liability — Certain professionals, such as accountants, attorneys and doctors, are at greater risk of lawsuits due to negligence or malpractice. Professional liability provides financial protection from such suits.
- Commercial auto insurance — If your business owns and operates a fleet of vehicles (even a single car), then it likely needs commercial auto insurance to cover both the vehicles and their drivers.
- Workers compensation — This form of legally required insurance reimburses employees who become injured or disabled on the job.
- Health insurance — Small businesses are usually not required to provide their employees with health insurance, but many choose to do so.
Again, these coverages are available from a wide range of commercial insurance companies — including, probably, the same company that provides your BOP. An employee health insurance plan can be purchased from an insurer specializing in group health insurance coverage.
Consider a BOP for your small business
You’ve worked hard to grow and maintain your business. And you’ve invested too much of your time and effort to risk everything because you don’t have insurance. A BOP provides an easy to understand, affordable selection of essential coverages. It can be customized to meet your specific needs. And, it’s available from a wide variety of insurance companies.
Your best next step? Contact an insurance agent. Agents are licensed by the state, and trained to provide personal service and advice when it comes to protecting your business. An agent can review your insurance needs, and match you with the best coverage at a price that works for your budget.