Small business owners have a lot to consider when choosing insurance that fully protects their business. One coverage option, a business owners policy (BOP), can take the guesswork out of the process. A BOP bundles several types of coverage in one package, similar to the way a homeowners policy works, but instead is designed for small and midsized businesses.
Business Owners Policy Key Features
A business owners policy generally combines the following types of coverage one convenient bundle:
- Commercial property insurance—Covers losses to property from common perils, which is an event or situation that causes property damage or loss. It also covers office equipment, furniture, inventory, machinery, raw materials, computers and anything else that is vital to business operations.
- General liability insurance—Covers a company’s legal responsibility for any harm it may cause to others, up to the policy limit. It also covers attorney fees and medical bills for anyone injured by the company.
- Business interruption insurance—Reimburses for loss of income if a covered disaster interferes with the successful operation of the business.
Business Owners Policy Exclusions
Although a BOP is a convenient insurance option for small to midsized business owners, it does not cover professional liability, auto insurance and workers’ compensation. Additionally, workers’ life, health and disability coverage are also excluded from a business owners policy. However, for those exclusions, business owners can purchase separate insurance policies. Other separate insurance policy examples include the following:
- Errors and omissions (E&O) coverage – Businesses that provide services for a fee can be sued by customers who claim that they were harmed because the business failed to perform its job properly. Errors and omissions (E&O) coverage pays for any judgement for which the insured is found legally liable, up to the policy limit and also covers legal defense. This coverage is also known as a Professional Liability policy (PL).
Ideal Candidates for a Business Owners Policy
Not every small business is a good fit for a BOP. Businesses that have the following characteristics are ideal candidates for a BOP:
- Operate in a physical location, whether home-based or outside the home – not an online business
- Have assets that can be stolen, including products, cash, furniture and digital property
- Are at a high risk for lawsuits
- Employ less than 100 employees and have less than $5 million in sales
The following types of businesses frequently purchase BOPs to protect from losses not covered by general liability insurance:
- Manufacturers
- Religious organizations
- Apartments
- Restaurants
- Technology consultants and solutions providers
- Wholesalers
- Retailers
Business Owners Policy Eligibility
Small to midsized businesses need to meet specific criteria in order to be eligible for a BOP. When determining eligibility, insurers consider factors that include the type of business, size of its primary location, class of business and revenue.
Premiums for BOP policies are based on eligibility factors, as well as financial stability, building construction, security features and fire hazards.
When purchasing business insurance, it is important to obtain the right amount. Contact your agent for guidance as to whether a BOP is a logical choice for your business. If it’s not, we can consider a General Liability policy (GL) or a Professional Liability policy (PL).
