Businesses need insurance that covers various potential risks. A standard liability policy should handle on-site damage and employee injury. Additionally, businesses need insurance to cover costs related to potential tort lawsuits that allege negligence or misinformation. All of this and more are included within a business owner policy (BOP).
While standard liability insurance handles the financial losses of the business owner and their customers, it doesn’t cover items related to property. In simpler terms, a general liability policy won’t cover any of a company’s equipment or the building where it resides.
When an organization goes beyond standard liability and purchases a business owner policy, it activates additional coverage. It shelters the complex, its machinery, and the tools required for general and emergency maintenance.
Overall, a BOP is a must for organizations if:
They maintain private customer data.
They own or rent equipment that can be damaged.
They own or rent a building.
They have employees that might be harmed in the workplace.
No matter how small, there’s always a chance for a lawsuit.
BOPs aren’t generalized for every company. Insurers customize these plans according to the client’s needs. Thus, they only pay premiums for the items that are critical to minimize interruptions.
For example, while all businesses might request coverage for fire and business operation, they may decline to select the option for electronic data loss. On the other hand, an IT organization would probably select the previous two items but not coverage for hired or rented vehicles.
Another BOP option is a clause for commercial crime insurance. This helps companies cover legal costs in relation to employees who performed criminal activities on their equipment. Money laundering is one example of such an activity.
While there are several options under a BOP, it doesn’t cover certain items. Among those are liabilities related to professional advice given to a customer. In this situation, a company needs to purchase errors and omission (E&O) insurance.
The cost of a BOP depends on several factors, including the following:
State where the business is located
Value of the insured equipment
Liability limit for each occurrence
Liability limit for collective occurrences
Here’s an example to better understand the last two line items: When choosing an individual liability limit, let’s say a company decides on $1 million. For multiple situations, the company could increase the limit to $2 million.
Should an issue develop where coverage is needed, the insurer would apply the amount listed for an individual occurrence. If another event took place, the business would continue to be covered by the single occurrence amount.
If that was used up, then the liability limit for collective occurrences would be used. Unfortunately, if the company used up all of the coverage in this category, they would need to pay the remaining legal and retribution costs from their own funds.