As small business owners know, there are many types of business insurance. In fact, it can be confusing. The Business Owner’s Policy BOP is a policy that has business insurance benefits because it combines coverages under one umbrella.
How much does business insurance cost? What’s included in a BOP policy? Do you need coverages that aren’t part of the standard BOP policy?
What is Business Owners Policy Insurance?
Small businesses like business owner’s policy insurance for three main reasons:
- Broad insurance coverage needs are combined in one policy
- The business owner’s policy – because of that combination – saves money.
- The BOP insurance combines general liability insurance and property insurance, which are the staples needed by business owners.
Why You Should Take Out a Business Owners Insurance Policy
Small business owners can’t do without insurance. It’s an unavoidable cost of doing business. Here are examples of when BOP insurance is needed:
- You operate out of a physical location. You have equipment and/or inventory. You store data with customer information.
- You operate out of your home. You may or may not have equipment or inventory. You store data with customer information.
- Your business operations take place on someone else’s property. For example, you’re a landscaper or contractor. You need a BOP if your business has potential risks of damaging someone else’s property – your lawnmower shoots a rock through a homeowner’s window.
- Customers visit your place of operation, whether it’s a physical location or your home. Customer injury is a possibility.
- It’s possible that an equipment breakdown and/or loss of inventory would mean a loss of income.
What is Covered by a Business Owners Insurance Policy?
Here’s how BOP insurance would provide coverage. Remember, you can customize a business owner’s policy BOP with additional coverages to best fit the purpose of your business:
This type of insurance covers you for damages to someone else’s property or personal injury (bodily injury including medical expenses). This general liability insurance should also provide assistance with legal costs should you be sued due to bodily injury of a customer which occurs on your property, or product-related claims. General liability insurance also covers you for “advertising injury” – for example, you’re accused of copyright infringement for an image you use in advertising. Coverage includes your legal defense costs.
Commercial Property Insurance
This type of insurance covers the loss of business equipment or property, whether it’s owned or leased. It can include property damage to the building itself, plus things like office business furniture, inventory, and equipment. Usually, there are two types of policies under this category – standard and specialized policies. With specialized, you can choose to expand covered loss.
Business Income Insurance
In the event of property damage, equipment damage or breakdown, or inventory loss, income insurance means that lost income will be replaced. That type of coverage helps you stay afloat if you need to meet payroll obligations, pay rent or mortgage, utilities, etc. This is often called business interruption insurance.
Computer Software/Professional Services
This type of insurance covers you for a data breach, customer data compromise, failure of electronic equipment and/or software, identity theft, and loss of data or valuable papers/records related to the business. This is also called cyber liability insurance. It protects you in the event of a data breach that causes clients’ personally identifiable information to be compromised. Policies may also protect you against employee dishonesty that impacts your bottom line.
Unfortunately, despite the broad coverage provided by a business owner’s policy BOP, you are likely to need additional protection from other types of insurance policies, especially if you have employees:
- Commercial auto insurance – Not covered with a BOP but can be added to a Commercial Package Policy (CPP). More on that later.
- Errors and Omissions (E & O) insurance – Covers you for mistakes you make while providing professional services. For example, you’re a surveyor and you make a mistake with property boundaries. This is often referred to as professional liability.
- Employment Practices Liability Insurance (EPLI) – If you have employees, this protects you against lawsuits brought by them regarding things such as wrongful termination or harassment.
- Hazard Insurance – Provides property coverages for outdoor business property, such as fencing and signage. This type of insurance covers you for damages caused by natural disasters.
- Disability Insurance – This coverage is inexpensive and covers you should you get injured or ill.
- Workers compensation – If you have employees, you must provide workers’ compensation insurance. This policy covers their medical costs for a work-related injuries.
How Much is Business Owners Policy Insurance?
There are many factors impacting BOP costs. For example, rates vary between small and medium-sized businesses. Other factors that impact the cost include the type of business, property coverage needed, location of the property, liability risks of the type of business, whether commercial building coverage is needed, type of business products, optional coverages added, and more.
As a general figure, you can expect a cost ranging from $500 to $2,000 monthly, according to figures from the insurance information institute.
How to Choose the Right Business Owner’s Policy Insurance
Ready to get started with your business owner’s policy BOP? Here are some steps to follow:
- Assess your risk, ranking covered liability losses.
- If you operate a business from your home, check your homeowner’s policy or renter’s insurance policy to see what’s covered.
- If you have employees, list the additional policies you will need, such as worker’s compensation and EPLI.
- List business property (equipment and inventory) and calculate a dollar amount.
- Estimate the time it would take you to recover due to loss of equipment or inventory.
Look into disability insurance. You may be required to have it in order to get a BOP.
How to Get BOP Insurance
- Assemble all your information so you’re ready to contact an insurance company.
- List the coverages you need, especially additional coverages which won’t fall under the BOP umbrella.
- Before calling a broker, insurance company or local agent, do some networking. If you’re a member of your local Chamber of Commerce, start asking questions with contacts there. Find out what choices other business owners have made – those that operate the same type of business or operate in your area. Which insurance company do they recommend? Is there an insurance company name that is most frequently lauded?
- Contact each insurance company and make comparisons. Don’t compare only by price – compare by coverages as well.
- Compare the “second umbrella.” The BOP is an umbrella for liability and property. An insurance company may group your BOP and the additional coverages. Make sure the company has policies for all the types of coverages you require. Grouping policies with one carrier should lead to cost savings for you.
What’s the Difference between general liability insurance and business owners’ policy?
The BOP includes general liability plus property/equipment protection, business interruption insurance and loss of data/data breach protection.
The commercial package policy is business insurance which includes general liability and property. What’s different is what can be added to the CPP.
With the CPP, you can add business vehicles as a commercial auto insurance policy. You can also add coverage called Inland Marine. Inland Marine Provides coverage for items that are in transit on the ground (Inland).
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