What a Business Owners Policy Is All About:
As a business owner, you’re subject to a lot of liability. So why risk it? Protect yourself with a Business Owners Policy, or BOP, a simple and convenient way to ensure your business’s physical and financial assets are covered.
A Business Owners Policy combines protection for all major property and liability risks in one convenient package. These packages are typically designed for small and mid-sized businesses, and offer a broad range of coverage.
Read on to learn more and see if your business should consider purchasing a BOP.
What Is a Business Owners Policy?
A Business Owners Policy packages together several policies to offer small and mid-sized business owners one convenient policy to protect themselves. It simplifies coverage needs by combining two policies that most businesses need - property and liability - while offering savings over purchasing each policy separately. Business Interruption Insurance is also frequently included in a BOP.
Businesses can tailor a BOP to meet the unique needs of their industry or situation by adding additional optional coverages. One of the most popular optional coverages to add to a BOP is data breach coverage. If your business stores or handles private customer information, you can add coverage to protect yourself in case of a data breach. Another popular addition is Professional Liability/Errors and Omissions Insurance, which is important if you provide services to clients for a fee.
Do I Need a Business Owners Policy?
Most small business owners should purchase a BOP because it’s the easiest and most affordable way to achieve broad coverage.
A BOP comes in handy if:
- Your business has a physical location, like a store, apartment building or an office. If your business is located outside of your home (or even, in some cases, if it is home-based), you likely should consider a BOP.
- You have assets that could be damaged or stolen. That includes furniture, cash, product inventory and office equipment as well as digital assets, like customer data.
- Your business it at risk for lawsuits. If customers visit your place of work, for example, they could become injured while on the premises and sue you.
- You have less than 100 employees and $5 million in sales.
Many small businesses can benefit from having a Business Owners Policy in place to protect themselves from unexpected financial losses that aren’t covered by General Liability Insurance. The types of businesses that frequently purchase Business Owners Policies include:
- Religious organizations
- Consumer services
- Apartment buildings
- Technology consultants and solutions providers
- Retail stores
However, not every business is eligible for a BOP. Eligibility requirements vary among insurance providers. Here’s a general overview of what is considered when determining eligibility:
- Certain class of business (eligible classes includes small restaurants, stores, office- or service-based businesses, wholesale distributors, apartments and independent contractors).
- Where you conduct the majority of business operations (most policies require your business to complete most of its business on the premises)
- The size of your business’s primary location
- Your revenue
Still not sure what you need?
CoverWallet's Insurance Checklist , you'll find a list of insurance types needed for your specific business or industry.
What Does a Business Owners Policy Cover?
At a High Level
A Business Owners Policy typically includes three types of insurance: Property Insurance, Business Interruption Insurance and liability protection. There are additional, optional coverages you can add to tailor the policy to fit your business’s specific needs, such as data breach coverage.
Getting Into the Details…
Property Insurance insures all types of physical property, from a building you may own or lease to office equipment and product inventory.
Business Interruption Insurance covers the loss of income resulting from a disaster (like a fire) that disrupts the operations of your business. This type of insurance will come in handy when you have the added expense of operating out of a temporary location after a catastrophe, or when you need to continue to meet financial obligations (like rent or payroll) when you had to suspend operations for a covered reason.
Liability Insurance protects your business from lawsuits as a result of things that you or your employees do (or fail to do) that cause bodily injury or property damage to others in the course of business. That could include defective products, mistakes made in servicing a customer and faulty installations. Coverage should also extend to the cost of your defense, since a business can be sued even if it did nothing wrong, and defense can be expensive.
Data breach coverage is frequently added to a Business Owners Policy, and will help you remedy data breach situations as quickly as possibly. This addition would cover the cost of things like notification of impacted individuals, the hiring of a public relations/crisis communications consultant or credit monitoring services.
Data breach coverage is broad, and can even cover you if private data is stored internationally. In addition to the coverage mentioned above, this addition to your BOP could cover defense and settlement costs from resulting lawsuits, replacement of lost income due to a covered data breach, and extortion expenses or ransom payments from attackers. A good policy will also protect your business from data breaches that occurred prior to the policy effective date.
Another additional optional coverage many business owners choose to add to their BOP is Professional Liability/Errors and Omissions Insurance. This type of insurance is important if you provide services for a fee to customers, as they can hold you liable for damages that they believe are the result of an error (or omission) on your part. Even if you’ve done nothing wrong, your business can still be sued by a customer claiming a negligent act. Professional Liability Insurance will cover defense costs in this case.
Some other, less common additional options that can be bundled into a Business Owners Policy include:
- Computer equipment
- Coverage for certain crimes
- Mechanical breakdown
- Forgery and fidelity bond
- Spoilage of merchandise
- Accounts receivable
- Hired/non-owned auto
- Cyber liability
- Inland marine
- Employment practices
- Medical and dental office endorsement
- Eating establishment endorsement
- Lawyers endorsement
- Accountants endorsement
- Increased fine arts coverage
- Earthquake protection
Here are examples of some types of BOP nsurance claims:
|TYPE OF CLAIM||DESCRIPTION||EXAMPLE|
|Property Damage||Property Insurance covers damages to your property, whether that’s a building or something you own, from unexpected events.||For example, if a pipe bursts in your store and inventory is ruined, under a BOP you would be covered. Property Insurance can also cover your landscaping, outdoor signage and storefront, your furniture and equipment, your building itself and others’ property.|
|Bodily Injury/Medical Expenses||Bodily injury claims can result from a customer being injured on the premises of your business. This will be covered by a BOP under General Liability.||For example, if a customer slipped and injured themselves in your store, they could sue you for bodily injury.|
|Lost income||Business interruption insurance, included in most BOPs, would cover your income for up to 12 months in case you have to suspend operations for a covered reason. This insurance would ensure you won’t miss things like rent payments or employee payroll. It would also cover the cost of things like relocation to a new temporary location, and advertising of the new location.||Examples of covered events that could force you to suspend business operations temporarily include fire or vandalism.|
You’ll Know It’s the Right Policy If It Covers:
- Property insurance
- Business interruption insurance
- Broad liability insurance that covers settlements and defense costs
- Data breach coverage, if relevant
- Professional Liability/Errors and Omissions Insurance, if relevant
- Additional optional coverages specifically suited for your business.
What Does a Business Owners Policy Not Cover?
A Business Owners Policy does not cover Professional Liability Insurance, Auto Insurance, Workers Compensation Insurance or Health and Disability Insurance. You will need to purchase separate policies to cover these things if you:
- Have employees (workers compensation, health and disability)
- Use a vehicle for work (auto)
- Offer professional services to clients (professional liability, frequently available as an optional addition to a BOP)
Additionally, you should read the wording of your policy carefully. Standard policies only provide compensation for damages caused by events specifically listed, such as a fire, smoke damage or vandalism. Your policy may also list certain items as “property not covered” under Property Insurance. However, if you’d like more protection, you can purchase a “special” policy that offers open-peril coverage.
Here are some more examples of things a Business Owners Policy will not cover:
- Intentional bodily injury or property damage when you or your business is at fault
- Liquor liability, which applies if your business manufactures, sells, distributes or serves alcoholic beverages.
- Bodily injury to an employee that results from employment (this would be covered under Workers Compensation Insurance)
- Medical expenses to any person if they are otherwise eligible for coverage under a Workers Compensation Insurance policy, a disability benefits law, or something similar.
What Are the “Limits” on a Business Owners Policy?
The limits of a BOP will vary according to the General Liability and Property Insurance policies in your bundle. Business Interruption Insurance typically provides up to 12 months-worth of income for businesses when they are forced to suspend operations due to a covered event.
How Much Does a Business Owners Policy Cost?
Purchasing a policy bundle is typically more affordable than purchasing General Liability and Property Insurance separately. Most providers will offer a discount of 15 to 20 percent.
The premium for a BOP will be determined based on a number of factors, including your business’s location, risk factors, number of employees and size. Premiums can range anywhere from $500 to $15,000.