TLTR: This article goes through how a business owners policy protects you business assets in times of a peril. Read more to find how you can protect your commercial assets.
It takes one unfortunate event to shutter your business. The first thing to remember, according to the U.S Small Business Administration , about 40% of small businesses fail following a disaster. Smaller companies are even more vulnerable, as 90% of them fail within two years following a disaster. But you can better prepare with a Business Owners Policy (BOP).
A BOP is a comprehensive policy that takes care of your company’s financial health following devastating events.
Debunking the Misconception
A general liability policy will cover losses due to damages to property caused by an unfortunate event.
In essence, your general liability insurance only covers losses that you or your employees cause to a third party. Also, it does not cover damages to your property. However, a BOP covers such losses to your property and that of others, keeping your finances intact in the process.
What Is a Business Owners Policy?
Seeing that a BOP is a bundled insurance package specially designed for small and medium-sized businesses. Generally, a standard BOP covers property damages, general liability, and losses due to business interruptions. However, you can customize your bundle and pay for the coverages that your business needs most.
How Does a Business Owners Policy Work?
So, consider this example: Your office building catches fire. The fire burns a unit of the office building, bringing operations to a halt. Unfortunately, the fire also damages a client’s car parked in the office area. After a one-month hiatus, you’ve now arranged a temporary workspace to resume operations, but are having to pay rent for the new space on top of your existing space.
You’ll be amazed by what your BOP covers during such a crisis. A BOP covers losses pertaining not only to damage to your properties but also to that of third parties. By and large it provides compensation for repairs to your office building, furniture, etc., and the customer’s damaged car. What’s more, a BOP covers losses due to business interruption. Adding to your delight, a BOP also pays for rent expenses for temporary workspaces.
What does a Business Owners Policy Cover?
So far, the best thing about a BOP is that you can tailor-make the policy package to fit your needs and affordability. A standard BOP includes commercial property, general liability, and business interruption insurances. However, below are the coverages you may want to include in your BOP:
Commercial Property Insurance
Commercial property insurance covers your business from losses to your commercial properties, including the physical building, furniture, documents, etc. I.e., it covers building structures and company-owned content. Hence the insurance compensates for repairs and replacements if your property is damaged, lost, or stolen.
General Liability Insurance
General liability insurance provides protection when your product or your employees injure a third party or damage a third party’s properties.
Business Interruption Insurance
Business interruption insurance covers income loss when events such as fire, theft, vandalism, or any other covered catastrophe disrupt your business’ operations.
Cyber Liability Insurance
Cyber liability insurance indemnifies your company from internet-based risks. It covers you from the liability of data breach or data loss due to cybercrimes such as malware, Distributed Denial of Service (DDoS) attacks, ransomware, and many more.
Commercial Auto Insurance
Commercial auto insurance covers your company vehicles and your employees in case of accidents or any insured events. Please note that a personal auto policy does not cover any losses to commercially-used vehicles.
Workers Compensation Insurance
On the second thing to remember, according to the Congressional Research Service, workers compensation insurance is mandatory in all states, except Texas. It covers expenses for disease, disability, or death of employees at work.
Professional Liability Insurance
Inland Marine Insurance
Does your business operation include transportation of materials, products, or equipment via trains or trucks? If yes, consider including inland marine insurance in your BOP. It covers losses to cargo while transporting or temporarily warehousing.
These are only a few of the coverages that you can include in your BOP. You can add other coverage such as commercial umbrella insurance, flood insurance, event insurance, and so on. Talk to your insurance agent and decide the best package for your business.
What Are the Common Endorsements?
Endorsements help you personalize your BOP. It helps to add, modify, or remove coverages to better suit your unique business needs. Here are some common endorsements that you may want to consider:
- Additional insured
- Computer equipment and gadgets
- Equipment breakdown
- Accounts receivable
- Hired/non-owned auto.
- Medical and dental office
- Fine arts and valuable
Are There Any Exclusions?
As vital as it is for you to understand the various available BOP coverages, you should know the exclusions too. Here are the perils that your standard BOP does not cover:
- Nuclear hazard
- An explosion of engines, boilers, or other equipment
- Decay, rust, or corrosion
- Military actions
- Ordinance of law
Apart from these, there are other exclusions such as power failure, loss of market, wear and tear, nationalization, etc.
BOP Insurance Cost
The cost of a Business Owner’s Policy (BOP) can vary depending on several factors. These factors include the size and nature of your business, the industry you operate in, the location of your business, the coverage limits and deductibles you choose, and any additional endorsements or customized coverage you may need. Additionally, insurance premiums are influenced by risk factors specific to your business, such as the number of employees, annual revenue, and previous claims history.
On average, BOPs for small businesses typically range from $500 to $3,000 per year. However, please note that this is a rough estimate, and your actual cost may vary significantly depending on the mentioned factors.
The number of employees and revenue determines the size of your business. You may require more comprehensive coverage depending on its size.
If the properties in your business are high-valued, they require greater coverage. Similarly, if any property you want to insure is challenging to replace, the BOP cost is more likely to increase.
Business location significantly impacts your insurance cost. For example, if your business is located in a high-risk flood area, you will need to pay a higher premium.
Replacement vs. Actual Cash Value
Replacement value means that the compensation amount equals the cost of replacing damaged properties with new ones. Under actual cash value, you get reimbursement after factoring in depreciation of the property. Comparatively, replacement value insurance costs higher than an actual cash value policy.
Even though no state law mandates that businesses have a BOP, certain insurance policies for businesses are mandatory like workers compensation and commercial auto. Instead of taking separate policies, you can bundle them under a BOP and get insurance at comparatively lower prices.
In its regular dealings, a business faces potential risks such as damages to a building, business interruptions, data losses, litigations from a third party, and so on. You never know when a disaster might hit your business. The best way to deal with such unforeseen events is to manage risks beforehand through a BOP.
How Can I Choose the Best Business Owners Policy?
Choosing the right BOP can be overwhelming for two reasons: Firstly, you may not fully realize your business needs, also secondly, the many available coverage options flooding the market.
This is to say, our handy tips below will give you a head start.
Understand Your Business Needs
One thing which is important to realize, assess the potential risks of your business. Is your office building located near a gas station or in a high flood-risk area? Sketch out any patterns of data loss, cybercrime, company product-induced client injuries, or any other risks your business is susceptible to.
Shop Business Owners Policies
Forthwith, the more you know about a policy, the better. Talk to an insurance agent or surf through insurance providers’ websites to learn about the various policy options available to you. In light of instant accessibility, you can get quotes online to get an idea of the cost.
Evaluate Your Options
To evaluate alternatives, you can consider the following:
- Firstly, see the types of losses covered by a BOP
- Secondly, understand the alignment of coverages offered by insurers to your business needs
- Thirdly, be familiar with coverage amounts and deductibles
- Fourthly, the premium amount
- Lastly, the credibility of the insurance provider
Contact an Insurance Agent
As experts with broader networks with insurance carriers, your insurance agent can provide you with a BOP at great rates. To clarify, the intricate terms in an insurance contract can be tricky. With the help of an agent, you can make an informed decision when buying insurance.
Keep Prices at Check
Most important, filter the risks you want to cover as you don’t need to cover them all. That will only cause the premium to soar. Decide the significant risks and their probabilities of causing a loss to your business. Then, talk to your insurance agent to bundle those coverages in your BOP.
Types of Insurance That Includes a Business Owner Policy
General contractor insurance
Food business insurance
Food truck insurance
Pet business insurance
Real estate insurance
Gas station insurance
Why Should You Use an Insurance Agent While Purchasing a Business Owners Insurance?
An independent insurance agent is someone who does not work for a particular insurance company. Instead, we sell insurance policies from multiple companies. It may be helpful to work with the best insurance agents near me rather than agents affiliated with specific brands. Here are some of the advantages of using this type of agent:
They provide better insurance options
The greatest benefit of using this type of insurance agent is the increased choices of insurance. If you work with an insurance company, your insurance options are limited. If you work or partner with an independent business insurance agent, you will view all the options available from many insurers. This gives you a lot of options to choose from and is sure to find a policy you like.
Another benefit of hiring an independent insurance agent is that it saves you money while purchasing insurance. In general, when looking at different options, you can find options that are cheaper than others. Insurance agents find the best deals rather than trying to focus on a particular brand or insurer. This way, you will save on insurance premiums and still get a policy that protects you.
They provide you with unbiased advice
Working with an independent agent will give you much-needed unbiased advice. Top insurance agents near me are very knowledgeable about the various insurers and policies in their industry and market. They help you obtain the best business owners’ insurance near me with their market knowledge.
They help in the claim process
If you have an insurance claim, these types of agents are likely to help you through the process. These agents don’t work for a specific insurance company, so they don’t have to follow the strict protocols used by the company’s agents. The insurance company will most likely send an adjuster to investigate your damage, but there are agents working for you. Your insurance company may charge you extra if you are not familiar with how the process works. The benefit of using trained professional independent agent rather than an insurance company, you will receive a fair pricing for your claim.
Our insurance agents will help you get the best business owners’ insurance if you are looking for business insurance agents near me. They are reliable and skilled agents who aim in providing affordable insurance policies. They are also focused in providing quality service and make sure customers are satisfied.
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Frequently Asked Questions
When do I request endorsements?
For this purpose, you can request endorsements at any time. While shopping for a new policy, renewing the existing one, or at any point in your ongoing policy – you can ask for an endorsement. Talk to your insurance agent, and they will do the rest.
What do you mean by named and open perils?
A named-peril is explicitly mentioned in your insurance contract, such as fire lightning, vandalism, falling objects, etc. Your insurer does not cover any losses due to perils not mentioned in the policy.
On the other hand, in case of open peril, your insurance covers all reasons for losses except for those explicitly excluded. Usually, standard exclusions are flood, seepage, earthquakes, etc.
What are the coverage limits of a BOP?
So far, the coverage limits for each element of a BOP differ:
- In first place, a general liability insurance limit is categorized in either per occurrence or per year limits. A per occurrence limit is the maximum amount paid out per covered event. A per year limit is the maximum amount paid out annually.
- Similarly, a commercial property insurance limit depends on your company-owned properties’ value.
- Lastly, a business income insurance limit is calculated by adding net profit and any fixed expenses incurred.
Does my BOP cover accidents that have occurred on or in my business premises?
Your BOP covers financial losses due to lawsuits brought by a third party. Such as, a potential customer slips inside your business premises without anyone’s fault. The customer proves that they got hurt inside your business and sues you. Yes, that is considered a fair lawsuit. In any event, your BOP will cover the expenses of dealing and settling the lawsuit.
January 17th, 2024 · 7 mins read
- Debunking the Misconception
- What Is a Business Owners Policy?
- How Does a Business Owners Policy Work?
- What does a Business Owners Policy Cover?
- What Are the Common Endorsements?
- Are There Any Exclusions?
- BOP Insurance Cost
- How Can I Choose the Best Business Owners Policy?
- Types of Insurance That Includes a Business Owner Policy
- Why Should You Use an Insurance Agent While Purchasing a Business Owners Insurance?
- Best Business Owners Insurance Companies in 2023
- Frequently Asked Questions
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