Business Owners Policy

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Business Owners Policy

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What Is BOP Insurance?

A Business Owners Policy (BOP) is a package of insurance policies that the majority of business owners need to have—which is why insurance carriers bundle these coverages and sell them as one product.

business owners policy vs. commercial package policy cover

More often than not, a BOP is sold to small and medium-sized businesses, since large corporations tend to have more complex risks that require customized policies.

In a typical BOP, businesses buy the following policies as one bundle or insurance package:

What’s The Difference Between a Business Owners Policy and a Commercial Package Policy (CPP)?

The main difference between a BOP and a CPP is that the CPP is much more flexible, which means that your business has greater options when it comes to putting together a coverage package that works best for your company’s specific needs.

In any case, whether or not you purchase a BOP or CPP is going to depend on two things; your coverage needs and your eligibility.

For more, read our full guide on business owners policy vs. commercial package policy.

What’s the Difference Between a BOP and General Liability?

While this might seem like a concept that’s easy to understand, it’s still one of the most commonly asked questions by business owners who want to buy their first insurance policies.

The difference between a BOP and general liability is that a BOP provides more coverage. A BOP will cover the liability losses that a general liability policy will cover, but it will also cover property losses and business interruption costs.

A commercial general liability policy typically covers third-party property damage, bodily injury, and advertising injury, along with defense costs if you are being sued for a covered loss.

A BOP covers all this as well since commercial general liability is an integral part of the policy package, but it also covers your business property. That means that it can cover everything a commercial property policy covers, including property damage, loss and restoration of paperwork and records, equipment breakdown, and more.

A BOP can be customized to fit your business needs, which means that additional coverages can be added to it, even commercial auto insurance. General liability covers what it covers and you can’t add different types of coverages to this policy like you can to a BOP.

However, sometimes it is better to buy your general liability and property insurance as separate policies if you need them to be very robust and specific since the coverage you get with a BOP can sometimes be limited.

A BOP is a perfect solution for a small business with a low-risk profile and basic coverage needs.

Who Is BOP Insurance For?

A Business Owners Policy is a policy package that was created with small businesses in mind. It was designed to cover many of the business risks that a majority of small businesses share, regardless of industry.

Large companies with more complex insurance needs usually don’t qualify for a BOP, meaning that the coverage they need can’t be provided by a Business Owners Policy. These large businesses would most likely be better off purchasing a variety of individual insurance policies that are all tailored to cover their specific needs based on their more complex risk profile.

If you fit into the following profile, a Business Owners Policy could probably be the right solution for covering your basic business insurance needs:

  • You have less than 100 employees
  • You make less than $10 million in annual sales
  • You have a physical location (could be your home) where most of your business is conducted

If these statements describe your business, you can get a risk-free, instant business owners policy quote with Embroker in just a few minutes.

Are There Requirements for Purchasing a BOP?

Every insurer has its own requirements regarding the location of your business, its size, its revenue, and class of business when it comes to selling a BOP. This simply means that not all businesses qualify for a BOP and might have to purchase either a CPP or all of their policies separately.

Usually, insurers won’t offer a BOP to companies that handle their business off-premises. Insurers usually have property parameters that go into their profile for a BOP and will not offer the policy package to businesses that have more or less property than they are willing to cover.

Smaller, office-based businesses (lawyers, real estate agencies, and other professional service providers), smaller restaurants and cafes, and retail stores are some of the types of businesses that typically do qualify for a BOP.

Why Do You Need a Business Owners Policy?

A common misconception is that big companies need insurance more than small businesses. That simply isn’t true. While large companies might have more complex risks, one unforeseen event or misstep can be financially crippling to a small business if it is not insured.

A large business will probably have the money to pay for a lawsuit without insurance or repair their office if a hurricane destroys it. But with less cash flow, a small business most likely wouldn’t have the funds to cover the additional costs from such events. Insurance is there to provide financial support and relief for such unexpected circumstances.

A Business Owners Policy can offer business owners peace of mind. This policy package makes it easy for business owners to maintain all of the most common insurance policies they need without having to manage several policies or sign contracts with different insurers. When you buy a BOP you have one policy that you’ve purchased from one insurer, making any eventual claims much simpler to handle.

The Advantages of Having a BOP

The most obvious advantage of having a BOP is that it casts a wide net of protection and provides you with a broad range of coverage while having to only purchase one bundled policy.

The other most obvious benefit is the fact that you end up saving money. Every cent counts when you’re running a small business, which is why BOPs are an attractive option for smaller companies that needs basic insurance coverage and would like to spend as little as possible on it.

Another great thing about a BOP is that it can be modified and customized to fit your business’s specific needs. You buy what you need and you don’t buy what you don’t need. It’s very easy to add various endorsements to your BOP that will cover common risks such as equipment breakdown or personal and advertising injury.

Finally, another key advantage of a BOP is that it’s an incredibly popular insurance option that is offered by all the top insurers and even smaller insurance carriers, meaning that you can really shop around to find the best BOP for your business in terms of coverage and cost.

What Does Business Owners Policy Cover?

When you purchase a Business Owners Policy, you will be covered for risks by the three insurance policies that are packaged into the BOP. Let’s take a deeper look into what those specific insurance policies cover.

Commercial Property Insurance

Commercial property insurance will protect you in the event that your business property is damaged or any equipment and other business contents you might own are damaged or stolen.

If your property is damaged by severe weather or vandalized, this policy will kick in to cover the costs of dealing with such issues. If any work equipment or inventory is stolen or damaged, a proper commercial property policy should cover those losses as well.

There are, generally, two important decisions to make when purchasing a commercial property policy. One is deciding between replacement cost and actual cash coverage. This means that you are either buying a policy that will cover the full replacement costs of your property or one that will only cover its depreciated value.

The second is deciding between a named perils and all-risk insurance policy. The first policy type covers damage incurred only by perils that are explicitly listed in the policy, while all-risk policies cover all risks that aren’t specifically excluded from the commercial property policy.

In any case, all businesses that either rent or own commercial property need to have property insurance and most tenants won’t rent to businesses that aren’t covered.

General Liability Insurance

Another insurance policy that every business needs is general liability. If a claim is filed against your business related to third-party bodily injury or property damage, a general liability policy should be able to cover defense costs and possible settlements.

It’s very common to hear about businesses being sued because of customer or client slip-and-fall accidents. A general liability policy would cover such claims. If someone who doesn’t work for your company is injured on your property, general liability would cover defense costs if a claim arises, as well as medical costs and any other expenses that could be related to the injury.

Business Interruption Insurance

If your business experiences a natural disaster, theft, or vandalism, commercial property insurance will cover these losses. However, it won’t cover the loss of income your business could incur if it is forced to close down for a period of time. That’s why every BOP should also include business interruption insurance.

A standard business interruption policy usually covers your business income for up to a full year, but only if you are forced to suspend operations for a reason that is covered within the policy. This helps companies make rent payments and pay their employees while the business is recovering or relocating and, therefore, not making money.

BOP Endorsements and Additional Coverages

Your average BOP includes the package of general liability, property, and business interruption insurance. However, businesses can add to their existing BOPs to meet their individual business needs.

Depending on business needs, businesses can choose to add endorsements (or riders) to customize their existing BOP. Bear in mind, that with every additional endorsement the price of your BOP increases.

Here are some of the most common endorsements that insurers tend to offer as a rider to a business owners policy:

  • Extra expenses: Covers expenses for relocating and continuing to work while your main property is being repaired or restored. It will cover renting property and equipment, overtime pay, and more.
  • Inland marine: Covers your business’s property that might suffer damages or cause damages to a third party while in transit.
  • Equipment breakdown: Covers the cost to repair or replace damaged or broken equipment.
  • Spoilage: Covers the cost of replacing perishable inventory that has gone bad due to a malfunction or issue with utilities.
  • Employee theft: Covers financial losses related to employee theft and other crimes.

What’s Not Covered?

A typical BOP covers only what you would expect the coverage included in it to cover. And even though the coverage that a BOP provides is standard coverage that just about every business will need, there’s a good chance that your business will need to buy additional coverage that does not fall into the scope of what a BOP can offer you.

There are policies that most small businesses need that simply cannot be attached to a BOP in any way. Workers compensation insurance and commercial auto insurance are good examples of popular coverage options that usually need to be purchased alongside a BOP.

However, BOPs are still fairly customizable, meaning that there are plenty of endorsements that can be attached to your BOP in order to provide you with more comprehensive coverage, including policies such as professional liability, EPLI, and common commercial property endorsements such as spoiled merchandise and mechanical breakdown coverage.

Naturally, the more endorsements you add to your BOP and the broader the scope of your coverage becomes, the more expensive your BOP will be.

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