What is a Business Owner’s Policy?
A business owner’s policy (BOP) protects your small or midsized business by packaging property and liability insurance into a single product. The main advantages of buying a BOP are:
- It is usually a less expensive bundled option.
- You have only one policy and premium to keep track of.
There’s no “one size fits all” BOP product, so different insurance companies will offer different coverages, and your policy can be tailored to your particular business needs.
Do You Need a Business Owner’s Policy?
If you’re a small or midsized business with less than $5 million in annual revenue and fewer than 100 employees, a BOP can help you protect yourself from unexpected financial losses that aren’t covered by a standard property or general liability policy. You should consider a BOP if your business:
- Has a physical location, such as a store or an office
- Is at risk for lawsuits
- Has assets that could be stolen or damaged, including cash, computers, furniture, and product inventory
The following businesses frequently purchase BOP insurance:
- Apartment buildings
- Consumer services
- Florists
- Hair and Beauty Salons
- Offices
- Professional consultants
- Retail stores
- Small restaurants
- Technology consultants and solution providers
BOPs don’t cover every type of risk, and they don’t make sense for every industry or business. Your business must meet certain requirements to qualify for coverage under a BOP, and these can sometimes vary from one insurance company to another.
When determining eligibility, insurance companies consider various factors, including:
- Type and class of businesses
- Size of primary location
- Business revenues
Many businesses are excluded from BOP coverage due to the high risks and exposures they present, including auto dealers, banks, bars, high-rise buildings, manufacturers, theaters, tree trimmers and parking garages.
Office buildings larger than 100,000 square feet or six stories may be excluded from BOP coverage. Similarly, buildings used for service operations are often restricted to no more than 35,000 square feet.
What a Business Owner’s Policy Will Cover
Below are the basic coverages in a BOP:
- Commercial property insurance protects your business building(s), as well as any assets or equipment your business uses. If your property is accidentally damaged, vandalized, stolen, lost, or suffers weather damage, property insurance will pay for repair or replacement. Some policies even cover loss or damage to electronic data. Experts recommend you seek the broadest coverage possible.
- Comprehensive general liability (CGL) and limited worldwide liability insurance covers you if someone is injured at your business or by your products or services. These costs could include the injured party’s medical and repair bills or your legal fees if you’re sued.
One advantage of a BOP is that it often includes several coverages that typically require an endorsement under a standard property or CGL policy. Possible coverages are:
- Business income or interruption insurance – this helps you pay bills and employees if your business must temporarily close due to fire, wind damage or other covered losses. This coverage is usually added on an actual loss-sustained basis and doesn’t have a coverage limit.
- Accounts receivable insurance – protects against losses from unpaid invoices.
- Crime coverage – can help with some of the costs resulting from fraud, theft, and forgery.
- Cyber liability or data breach insurance – covers the expense of providing customers with credit monitoring services the cost of public relations to restore your company’s good reputation, as well as coverage for legal defense and judgments if your business is sued over the loss of data. Some BOPs also provide coverage for extortion and/or ransom payments when a hacker takes control of your computer system and will release it only upon payment.
- Equipment breakdown – provides coverage for expenses related to repair or replacement of your computers and other business equipment.
- Personal and advertising injury coverage – protects your business against copyright infringement, libel, and slander claims.
- Rented vehicles liability – covers vehicles you lease, hire, or borrow.
Be sure to ask your insurance professional about BOP features that best meet your business needs. Some insurers may include coverage for your unique risks in their policies, while others may require you to buy an endorsement. For example, some insurance companies will add professional liability or employment practices liability to your BOP (see below).
What a Business Owners Policy Will Not Cover
BOPs typically won’t cover:
- Professional liability, also known as errors and omissions (E&O), which covers substandard work or negligence such as missed deadlines.
- Directors and officers (D&O), which covers alleged wrongful acts committed by the directors and officers of a company.
- Employment practices liability for costs related to wrongful acts in the workplace, including harassment and discrimination.
- Fleet auto liability for costs related to vehicle claims Workers’ compensation to cover employee injuries Employee benefits, such as health and disability insurance Flood or earthquake damage
Each one of these coverages may be offered by the same provider, or purchased from a different provider, as needed.
Stay Protected with Richland-Knowles Agency
An excess liability or umbrella insurance policy provides additional coverage beyond the limits of your BOP. It may even reimburse you for deductibles. You have invested a lot of time and effort building your business. Don’t risk its future by being underinsured. A single unfortunate lawsuit or catastrophic event could cause your business to close. Contact Richland-Knowles Agency for your commercial insurance needs!
