is a business owner's policy (BOP)? The
BOP is a package of insurance coverages in a single policy that
meets the insurance needs of many small business owners. It includes
commonly required property and liability insurance and some optional
coverages. Unlike other stand-alone small business policies, it
eliminates coverage restrictions and limitations and offers additional
What does a business owner's policy usually
- Buildings - the cost to repair or replace
- Business Personal Property - the contents
of your buildings, including furniture, fixtures, machinery, equipment,
inventory and tenant improvements to the building
- Property off premises - a limited amount
of coverage for business property that is not on the insured premise
(or property that is usually at the business location, but isn't
in this particular case)
- Glass and signs
Business interruption coverage
If your business suffers a property loss it could
cause the business to slow or close down while repairs are made.
This may mean a complete or partial revenue loss depending on the
timeframe and the damage. From the time the loss occurs until your
business is running again, insurance can replace your lost profits,
and provide a source of money to pay your necessary continuing expenses,
like rent, payroll, taxes, etc.
You can also buy insurance to cover any extra expenses
incurred in getting your business back into operation. It may take
a while once you re-open for customers to discover you are back
in business, which may hurt your bottom line. To meet this need,
insurance companies offer coverage for the difference between your
"before loss" business income and your "after loss" business income
for a month or more while you regain your customers.
Crime coverage -
Property policies usually don't cover the loss of money and securities,
and exclude many crime-related losses. However, you can purchase
crime coverage, which includes:
- money and security coverage - pays for money and securities
taken by burglary, robbery, theft, disappearance, and destruction.
- employee dishonesty coverage - pays for
losses caused by most dishonest acts of your employees, such as
embezzlement and theft.
Compensation coverage -
This is a package of coverages, which protects you and your business
from lawsuits arising from:
- Accidents causing bodily injury to other people (a customer
trips and falls in your shop)
- Accidents causing property damage to other
people's property (you sell a toaster to a customer which malfunctions
and causes fire damage to their home)
- Personal injury such as invasion of privacy,
wrongful eviction, libel, slander, or false arrest or advertising
injury such as copyright infringement or false advertising
Compensation coverage also includes Commercial General
Liability insurance which pays for the cost of legal defense including
providing an attorney, paying court costs, and any settlements or
judgements against the business. As always, the dollar amount of
coverage depends on the terms of your policy.
Vehicle coverage -
You may need non-owned and hired auto liability coverage for vehicles
your employees use or that you rent or borrow, particularly if your
business does not own a vehicle. Commercial auto insurance can cover
these risks, including providing you an attorney, covering court
costs, and payment to injured persons.
What's not usually included in the BOP?
- Earthquake and flood insurance
- Workers' compensation
- Group health, life, disability insurance
- Vehicle insurance for owned vehicles
- Specialized liability coverages, including
certain professional liability, errors & omissions, malpractice,
directors & officers, and employment practices liability
Who does a business owner's policy usually
If the business is being operated as a sole proprietorship,
then the BOP covers the business owner and spouse in their business
activities. If the business is a partnership, then the BOP usually
covers all of the partners and their spouses in their business activities.
If the business is a corporation, then all of the officers are usually
covered in their business activities, but not their spouses. For
all forms of business entities, the employees of the business are
also covered if they are sued for their actions in the course and
scope of their employment.
How does a business owner's policy work?
Property loss If a property loss occurs, you
should contact either your insurance agent or the insurance company
and report the loss as soon as possible. Usually a claims adjuster
will be assigned to handle the processing of your claim and determine
to what extent the loss is covered by your insurance. Frequently,
a recorded statement of your detailed description of the loss is
taken. In property losses, you will also normally need to create
an itemized list of the damaged, destroyed or missing property,
including its physical description, replacement cost, and date of
purchase. Often, the adjuster will make an "on-site visit" to view
the damaged property and the effect of the loss on your business.
Once the claims adjuster has satisfied all the requirements
to document the loss, the insurance company will complete its processing
of the claim and issue you a check, which depends on the extent
that your loss is covered by your insurance. Any disagreements you
have with the insurance company regarding the extent of any insurance
reimbursement can usually be resolved through discussions and the
provision of additional information.
If a liability claim occurs, you should
notify your insurance agent or the insurance company immediately.
Rapid handling of claims of an injury to other persons often can
accelerate the settlement of the claim. The claims handling process
for a liability claim is similar to that of property loss, except
the insurance company works directly with the third party making
the claim against you. If the insurance company feels it is necessary,
it may hire or assign an attorney to conduct an investigation and
attempt to settle the claim as quickly as possible. Most policies
provide the insurance company with the right to settle a third party
claim, in good faith, regardless of your desire to fight the claim.
Why do you need a business owner's policy?
Most business owners need a BOP or similar coverage
to protect their assets since so many circumstances are completely
beyond a business owner's control. For example, a burglary or fire.
In our society, defending against even a minor legal complaint is
costly, and it's a great relief to be able to hand over a claim
to an insurance company that understands how to handle them. In
most cases, for a modest premium, a BOP or similar coverage can
provide you with a great deal of financial security, and permit
you to keep your attention on running your business profitably.
What affects your insurance costs?
Insurers have many different rating formulas
to generate premium quotations. The following factors are some of
those that generally affect the amount of your premiums.
- Business type
- Construction type and building age
- Business location
- Building security features, including alarms, sprinklers,
and whether your immediate neighbors present any fire hazards
- The 3 to 5 year claims history of your business
- Management experience, credit worthiness, years in business,
and financial stability
- Liability and property insurance coverage amounts
- Elected optional coverages
How do you get the best policy at the
Request a quote or contact