A business owners policy (BOP) combines commercial general liability coverage with commercial property insurance for qualifying small and medium-sized businesses. A BOP offers a qualifying business the opportunity to get more affordable coverage to meet basic insurance needs. The insurance company will determine whether a business is eligible to purchase a BOP.
A prepackaged BOP may not meet all of a company’s insurance needs. But a BOP can be more cost-effective than purchasing each included coverage separately. Endorsements and riders can provide additional coverage.
A BOP provides coverage for common risks, such as fire, liability claims, theft, and business interruption losses. There are three core insurance coverages typically included with a BOP:
This coverage part helps pay for third-party claims due to injury or property damage. If someone is injured while visiting a business, a BOP helps pay their medical bills. In addition, the policy may pay legal fees and litigation expenses if someone sues alleging property damage or injury. It also helps cover the cost of repairing or replacing someone else’s property if a company owner or employee causes damage during day-to-day business operations.
Any business that owns equipment, maintains inventory, or manufactures products should have property insurance. This coverage helps pay for repairing or replacing company property if it’s damaged or destroyed in a covered event, such as a fire, storm, or an act of vandalism or theft. If the business leases property, the landlord may require a minimum amount of commercial property insurance.
This coverage, sometimes called business income insurance, helps replace lost revenue if a business must close to rebuild or repair after a covered event. If there’s a period when a company can’t generate revenue, this coverage can help pay for recurring expenses such as payroll, rent and taxes.
Each business faces unique risks, and a standard BOP may not provide coverage for all of the risks that a business faces. In addition, a BOP’s coverage limits may be lower than a business needs. With the help of an insurance professional, a company tailor a business owners policy by adding coverages to meet the company’s specific needs. Depending on the size of the business and its industry, an insurance professional may recommend some of the following additional insurance coverages:
It’s also possible to increase a company’s liability coverage by purchasing an excess liability or umbrella insurance policy. These policies provide additional coverage to help pay for third-party claims exceeding the limits of the company’s BOP. Depending on the policy, umbrella insurance may help cover deductibles as well.
Many business types qualify for a BOP. In general, BOPs are designed for companies located outside of a private residence with fewer than 100 employees that produce less than $5 million in annual revenue. However, eligibility criteria for BOPs vary by insurance company. When evaluating options for BOP coverage, business owners must consider risks specific to their industry. A BOP can help qualifying businesses save money. But this type of packaged insurance product doesn’t make sense for every small and medium-sized business.
Nearly any small business that owns equipment, buildings or other property can benefit from a BOP if they meet the insurer’s eligibility requirements. Business owners policies provide small businesses with flexible commercial insurance policies that can be modified or added to by amending the existing policy to meet the company’s needs. In many cases, it’s less expensive to purchase a BOP than it would be to buy individual property and liability insurance policies providing the same coverage.
Your insurance professional can help you decide whether a BOP is right for your business. To get the best possible coverage to meet your company’s needs, it may be necessary to add riders or endorsements to a BOP as well.
For additional coverage guidance and solutions, contact RMC Group today at 239-298-8210 or rmc@rmcgp.com.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2022 Zywave, Inc. All rights reserved.