What's Business Owner Policy Insurance?
If you're a relatively new business owner, you may be trying to figure out how to insure your business. If you've come across the option of buying business owner policy (BOP) insurance, you may be scratching your head and weighing it against buying a general liability insurance policy.
Insurance for business owners often feels like a guessing game, unless you have a reputable agent giving you honest guidance. If you're looking for business insurance and are confused, you can be matched with an agent, who can answer all your questions. We'll also give you a broader understanding of what business owners insurance covers below.
What Is BOP Insurance?
Business owners insurance, or BOP, combines liability insurance with property insurance and business interruption insurance into one package, which is widely sold by many insurance agents who handle commercial sales. For convenience and savings, it's a popular one-stop insurance option for many small businesses and some mid-size businesses. A majority of restaurants, retail stores and contractors have BOP insurance.
If elected, a BOP policy may include crime insurance, auto insurance, flood insurance and other added coverages. If you have a restaurant business for instance, you may elect to insure against spoilage of merchandise (food). If you're a tech company, you may want to insure your computer equipment. Perils you can also insure yourself against include forgery, mechanical breakdown, and more.
Each business is unique, so make sure you're working with a good insurance agent when electing the appropriate coverages for your specific business.
BOP Insurance and Property Insurance
Property Insurance is a named-peril coverage, meaning that some damages that are not mentioned in the policy or are excluded in the policy's declaration page are not covered. Usually, you're only covered for events written in the policy, so make sure to see what you're covered for and where you're left exposed. You may want to see if there are other coverages you can buy to make your insurance package more comprehensive.
Some BOPs have an open-peril coverage (or all-risk coverage). This does not mean that everything is covered in the event of a loss. It means that you are covered for anything that is not excluded, so always check the exclusions written into your policy so you don't have any misunderstandings with your insurer. This type of policy may or may not cost more than a standard BOP insurance policy so compare rates and coverages.
The types of property covered by a BOP include: the building(s) owned or rented; outdoor fixtures; equipment and other business-owned property. It also covers third-party owned property that is in the care of or in use by the business or business owner, as long as it's within a specified proximity to the business premises when the loss occurred.
BOP and Business Interruption Insurance (BII)
This form of protection is possibly the most important coverage in a BOP insurance policy. If something were to occur to make the business premises uninhabitable for business operations, this protection would cover the loss of income. Your income would be reimbursed if the office was damaged due to fire, flood (if you have the appropriate insurance for flooding), or if your work equipment is vandalized or stolen.
Business interruption insurance, or BII, can be bought separately from a BOP policy but it'll cost more. BII isn't just lost income insurance, either. In the event of a covered catastrophe BII may help pay mortgages and leases, taxes, relocation costs (this is especially important if this determines whether or not a business can get back on track), payroll costs and more.
It's a good idea to calculate your business's projected income when you buy a policy. You'll want to project for the year and then break it down by month. Come up with a figure for how long it would take you to get back on your feet if your business could not function for a week or a month. You'll need to have an insurance professional appraise your losses if that ever happens but it's good for you to buy coverage for the right amount before the unthinkable does occur. Remember to include incomes and salaries in these figures.
BOP and Liability Insurance
Your legal troubles are protected with this type of coverage, if a consumer or client decides to sue you. Advertising, personal injuries, slander, libel and copyright infringement would be covered by the liability portion of a BOP policy.
Property damage you caused while doing your work would be covered by a BOP policy's liability insurance. Many contractors have BOP insurance for this reason.
What BOP Doesn't Cover
Having inadequate insurance for business owners is sometimes just as bad as having no insurance at all, so make sure you buy any coverage that your BOP insurance doesn't provide. If you are buying full coverage for your business, you'll want to consider buying some policies separately from your BOP coverage. Worker's compensation, health insurance and disability insurance are policies you'd have to buy separately.
BOP Insurance Cost
A business owners policy cost depends on the type of business you have and how much risk is involved in its operations. However, the best insurance for small business owners is a BOP package, because it combines three important policies into one. It's much more affordable than buying the policies separately.
Factors that determine the cost of a BOP include: the deductible amount (the portion you have to pay before getting paid the coverage), business location, business size, type of business, business claims history and safety.
Safety and location considerations often overlap because certain areas are more prone to floods and storms, which will raise premiums. If you live in a fire-prone area, it helps to have a sprinkler system. Also if you have a retail business, security cameras will earn you a discount and so will other safety equipment.
The average cost of business owners policy runs between $350 and $3,000 a year. The average BOP policy costs just under $1,200 a year. When you estimate how much you'll be paying, consider whether or not you plan to add on some coverages specific to your industry and business. The best insurance for small business owners is one that is customized to meet the challenges you'll face.
If you're ready to get multiple, free business insurance quotes, fill out a brief form to be matched with an agent who can help you further.