BOPs are typically geared toward small businesses that face basic liability and property risks. Any small business that deals with clients or the public and owns physical property should consider purchasing a BOP.
A Business Owner's Policy (BOP) is a type of commercial insurance policy designed to combine coverages. This customizable policy allows businesses to add coverages they need to a single policy at a cheaper price than purchasing each coverage individually.
Who Needs a Business Owners Policy?
BOPs are typically geared toward small businesses that face basic liability and property risks. Any small business that deals with clients or the public and owns physical property should consider purchasing a BOP.
A basic BOP includes:
General Liability
General liability insurance is the most common form of liability insurance. You likely have this type of insurance under your home insurance or renters insurance policy. In the business world, however, this is known as commercial general liability or commercial liability insurance.
This covers basic accidents of nonprofessional negligence that may result in bodily injury, property damage or personal or advertising injury of a third party. General liability can help with the victim’s medical expenses and offer compensation to the business in case of a lawsuit related to a covered accident.
Commercial Property
Commercial property insurance covers buildings and items owned by a business. This can include offices, warehouses, products, equipment and more. It covers against loss and damage caused by:
Fire
Wind
Lightning
Smoke
Hail
Explosions
Falling objects
Theft
Vandalism
As with most property insurances, commercial property insurance policies can be split into two categories of compensation: actual cash value and replacement cost value. The actual cash value of the business’ property accounts for depreciation, so as the value of certain items and equipment drops, so does the amount of compensation the business will receive after filing a claim. A replacement cost value policy does not account for depreciation and instead replaces objects with that of the same or similar value.
Business Interruption Insurance
Business interruption insurance is an often overlooked but crucial piece of insurance. This type of coverage provides compensation for lost income, including wages, while the business is unable to operate due to unexpected events, such as a natural disaster or government mandate.
Adding to a Business Owners Policy
Along with the basic coverages offered in a BOP, you can also add different coverages to protect your business against unique risks. Every industry has its own set of challenges, and thus need the right type of insurance in case of an accident or lawsuit.
Common coverages that are added to a BOP are:
Professional Liability: Professional liability insurance covers accidents of professional negligence that may cause a client to lose money. This is useful for any company or professional that provides a specialized service, such as medical professionals, accountants, instructors and more.
Cyber Liability: With nearly everything stored electronically, it’s crucial to keep any and all client information safe. Cyber liability steps in if sensitive or private information is lost, damaged or stolen due to a cyberattack. This often also covers data breach coverage.
Directors and Officers Insurance: Directors and officers insurance, or D&O insurance, covers the directors and officers of a business from lawsuits. These claims can concern almost any of their activities on the board, such as failure to comply with regulations, libel, slander, misconduct, etc.
Employment Practices Liability: Employment practices liability often comes as an endorsement on a D&O insurance policy but can be purchased separately. This protects the business if accused of misconduct such as discrimination, sexual harassment, wrongful hiring or firing, failure to promote and more.
Spoilage Insurance: For businesses that deal with produce, such as restaurants, spoilage insurance is a must. This insurance helps with the cost of replacing spoiled food if the spoilage is caused by an unexpected event, such as sudden equipment breakdown of refrigerators and freezers.
Equipment Breakdown: Equipment breakdown insurance covers the cost of repairs or replacements if equipment suddenly and unexpectedly breaks down. It does not cover breakdowns caused by normal wear and tear, or breakdowns caused by another event not covered.
Additional Endorsements: There are many endorsements you can add to insurance on your BOP to cover expenses normally excluded. An umbrella liability insurance policy, for example, provides coverage in case any of your other liability policies reach their limit for a claim. You can also add flood and earthquake insurance to your property insurance coverage, as these incidents are generally excluded from property insurance policies.
Common Exclusions There are some items that are excluded from a BOP and must be purchased separately. This includes:
Employee Benefits: Items you offer your employees, such as life insurance and health insurance, must be purchased separately from a BOP.
Workers Compensation: Workers compensation provides monetary assistance if an employee is injured at work.
Commercial Auto Insurance: Commercial auto insurance provides coverage for vehicles owned or used by a business for work purposes.