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– Ben Rollins, Axiom Optics
What Is BOP Insurance?
A business owner’s policy (BOP) is essentially a package of insurance policies that a majority of business owners need to have, which is why insurance carriers bundle these coverages and sell them as one product.
More often than not, a BOP is sold to smaller and medium-sized businesses, since larger corporations tend to have more complex risks that require customized policies.
In a typical BOP, businesses would buy the following policies as one bundle or insurance package:
What Does BOP Insurance Cover?
When you purchase a BOP, you will be covered for risks that are typically covered 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.
What Doesn’t BOP Insurance Cover?
The answer to this question is fairly simple. A BOP typically won’t cover anything that isn’t covered by the three aforementioned policies. Therefore, here are a few recommendations for additional policies that most businesses should look into purchasing along with a BOP.
Professional Liability Insurance: Commonly referred to as errors & omissions insurance, this policy protects you from claims of negligence, errors, and malpractice while providing a professional service. Lawyers commonly refer to this coverage as legal malpractice insurance or legal professional liability.
Commercial Auto Insurance: A commercial auto policy provides coverage if you or your staff are at fault in an auto accident that results in third-party personal injuries or property damage.
It will also usually cover costs related to theft, vandalism, and collisions.
Workers Compensation Insurance: One of the rare business insurance policies that your company is legally required to buy, workers compensation covers claims related to staff injuries, including medical expenses, lost wages, and rehabilitation.
Employment Practice Liability Insurance: EPLI guards your business against claims made by employees related to discrimination, harassment, and other workplace issues such as wrongful termination and failure to promote.
Umbrella Insurance: Umbrella insurance sits on top of other insurance policies and can kick in to help cover losses if the underlying insurance policy limits become exhausted. It is commonly purchased to support general liability, commercial auto, workers’ compensation, EPLI, and commercial property policies.
What’s the Difference Between a Commercial Package Policy and BOP Insurance?
The biggest difference between a BOP and what is referred to as a commercial package policy (CPP) is the options that they provide in terms of coverage. Most insurance experts will agree that BOPs are usually the best and most cost-effective options for small businesses that are just starting out, don’t have that many employees, and don’t rent out or own large properties.
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.
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.
While most businesses do commonly choose to include commercial property, general liability, and business interruption insurance in their CPP, they also usually add other coverages to the package, such as umbrella insurance, equipment breakdown insurance, auto insurance, EPLI, pollution liability, and more.
But the reason that people buy CPPs and BOPs is essentially the same; because it’s cheaper to bundle policies instead of buying them all separately. All in all, BOPs tend to be the perfect insurance package for small businesses, while CPPs are better suited for larger companies that have more complex coverage needs.
Highly-Publicized Examples of BOP Claims
- The Superior Court of New Jersey ruled that defendants were not obligated to remove snow and ice between parked cars until the cars either moved, or the snow stopped falling. The plaintiff slipped and fell in a Wal-Mart parking lot while it was snowing. See: High Court Rules For Defendant In Slip and Fall
- A new slip and fall lawsuit filed this week against a Thorntons gas station accuses the Joliet business of being negligent with its nacho cheese dip. See: Nacho Cheese Dip Leads To Thorntons Lawsuit
- A Middlesex County awarded $1 million in the case of a woman injured in a fall at a BJ’s Wholesale Club. See: BJ’s Slip-and-Fall Suit Yields $1 Million Verdict in Middlesex County
How Much Does BOP Insurance Cost?
Just like any other business insurance product that your company needs to purchase, there are several general factors that will determine the cost of your BOP, including the following:
Industry: The greater the workplace-related risks associated with your industry, the more you’ll pay. That means that a restaurant will almost always pay more for a BOP than a software company, for example.
Location: If your business is located in a region that is known for flooding or earthquakes, then your BOP will be more expensive compared to what a business located in a lower-risk geographic location would have to pay.
Longevity: If you are a brand new business, you will pay more for your BOP than a business that has been successfully operating for several years.
Number of Employees: The more employees you have, the more you will have to pay for a BOP.
Value of Property: The greater the value of your property and the harder and more expensive it is to replace your business contents and equipment, the higher your BOP premium will be.
Claims History: If your business has a history of property and general liability-related claims, you will pay more for your BOP.