Small business owners have a lot on their plate. On any given day, you may work with clients, deal with personnel issues, catch up on accounting and more.
Finding the right insurance policy can be a time-consuming addition to an already long to-do list. A business owners policy (BOP) is a simple way to secure important coverage if you’re a small- or medium-sized business. Learn more about how it works.
What is a Business Owners Policy (BOP)?
A business owners policy or BOP bundles 3 types of essential coverage: commercial property insurance, business interruption insurance and general liability insurance.
You pay 1 policy premium instead of 3, and it’s often less expensive to buy these policies together than to buy each type of coverage separately.
Business Owners Policy Coverage
Here are the details of each type of coverage in a BOP.
Commercial Property Insurance
This coverage helps with costs related to repairing or rebuilding your business if it’s damaged in a covered event (also known as a peril). It typically covers:
- The structures of your business: This includes your floors, walls, roof and ceilings. It also includes machinery and equipment, outdoor fixtures, items you use to maintain the building and any additions under construction.
- Your building contents: This usually includes your business inventory, raw materials and computers.
- Property in your care: This includes items clients have left for repair.
In most cases, BOPs cover damage due to fire, lightning, windstorms, hail, riots, vandalism, building collapse and some types of water damage. BOPs don’t usually cover damage from floods or earthquakes, so you may need a separate policy for those perils.
Business Interruption Insurance
Closing your business to make repairs or to rebuild can be devastating. This insurance helps keep your business going if it has to temporarily close due to a covered event.
Business interruption insurance can help with:
- Lost income
- Mortgage or rent payments
- Loan payments
- Employee payroll
Most policies have a 2- to 3-day waiting period before benefits start. Policies usually pay benefits for 30 days, but you may be able to opt for a longer period when you take out your insurance coverage.
You may also be able to include additional types of coverage. Contingent business interruption insurance helps to cover costs if you can’t operate due to a related business closing, such as a supplier.
Extra expense insurance helps to cover the additional expenses you incur due to being closed, like the cost of renting a temporary space. Civil authority insurance helps cover costs if the government requires your business to close due to physical damage to a nearby property.
Your insurance agent can help you determine which additional types of coverage are available and whether it’s worthwhile to add them.
General Liability Insurance
This type of insurance protects your business if you’re sued due to non-professional negligent acts. This means the act isn’t related to your professional expertise. It might be a client slipping and falling on your business property or an employee accidentally damaging a door frame while moving in furniture.
This coverage typically covers the cost of your legal defense and any awards or settlements up to your policy limits. It includes:
- Bodily injury liability: This is when a 3rd party like a client or vendor is injured. General liability insurance doesn’t cover employee injuries, though. Workers’ compensation insurance covers those.
- Property damage liability: This is when the property of a third party is damaged. It doesn’t include your business property. Depending on the circumstances, business property damaged is covered under commercial property insurance.
- Personal and advertising injury: This is if you’re sued over copyright infringement, false advertising, libel or slander.
- Medical payments: Some policies will pay for medical costs related to a bodily injury without the 3rd party filing a lawsuit.
Cost of BOP Insurance
There is no set cost for a BOP. Insurers will provide you with a quote that takes several factors into consideration:
- The type of business
- The value of your business
- Where your business is located
- The number of employees you have
- The size of your payroll
- Any safety precautions you have in place
- Your claims history
BOP Eligibility Requirements
Insurance companies decide on eligibility based on your application. In general, BOPs are a better fit for small- and medium-sized businesses. Larger businesses tend to have more complex needs.
If your business faces unusual risks, you may find purchasing the policies separately makes more sense than bundling them in a BOP.
An experienced insurance agent or broker can help you decide which option is best for you and your business.
Why Do You Need a Business Owners Policy?
You may need a BOP because it’s a simple, affordable way to secure essential coverage for your business. While it’s not all the insurance you’ll need, it protects you from a range of scenarios.
You don’t have to worry about making multiple premium payments, and it often saves you money over purchasing the policies separately.
Pros and Cons of a BOP
Here are the pros and cons of a BOP.
|1 premium for 3 types of insurance||May not be right for businesses with unusual risks|
|Provides affordable coverage for small- and medium-sized businesses||May not provide enough coverage|
|Often less expensive than buying the policies separately||You’ll still need to purchase additional coverage (workers’ compensation, commercial auto insurance, professional liability insurance)|
Best Business Owners Policy Options
Which insurance companies offer the best BOP options? Here are Benzinga’s picks.
Is a BOP Right for You?
Many business owners find that a business owners policy is a good fit. It simplifies coverage and lowers costs. It’s only a starting point when it comes to insurance, though.
Most businesses will need to add, at a minimum, workers’ compensation insurance. Certain professionals who give advice may need to add professional liability insurance.
To see whether a BOP is right for you, contact at least a few insurance providers. Compare coverage, premiums and the service you receive along the way.
Ultimately, the best small business insurance is what fits your business, its risks and your budget.
Frequently Asked Questions
Q. What are the most common business owners policy forms?
A policy form is the language of an insurance policy. Most BOPs cover commercial property insurance, business interruption insurance and general liability insurance. Some may offer additional coverage like professional liability insurance.
BOPs may also be named periods or use a special form. Named perils means the policy only covers causes of loss that are specifically listed in the policy.
The special form covers all causes of loss except those that are specifically excluded from the policy. BOPs that use the special form typically cost more than named-perils policies.
Q. What is the difference between a general liability and a business owners policy?
A general liability policy is a standalone policy that protects your business if you’re sued due to non-professional negligence. A business owners policy includes general liability coverage along with other types of insurance.
Both types of policies include general liability coverage, but the business owners policy offers other forms of coverage as well.