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A Complete Breakdown of a Business Owner Policy (BOP)

    5 minute read

    Owning a business is an exhilarating adventure, but it also comes with a unique set of risks. From natural disasters to client lawsuits, ensuring you have the right insurance coverage can be overwhelming. That’s where Business Owner Policy (BOP) comes in – your all-in-one insurance package offering peace of mind and financial protection. Whether you’re just starting out or looking to reevaluate your existing coverage, this guide will provide you with the knowledge and insights to choose the right insurance policy for your venture.

    Requirements for a Business Owner Policy (BOP)

    2 coffeeshop business women - business owner policy

    Not all businesses qualify for a Business Owner Policy (BOP). Typically, BOPs are designed for small to mid-size businesses with lower risk profiles. Larger businesses with more employees, revenue, or complex operations need more customized coverage than a standard BOP can offer. Such businesses often need a specialized Commercial Package Policy (CPP) rather than a BOP. A BOP may make sense for your business if:

    • Your business operates outside of your home.
    • You have fewer than 100 employees.
    • Your annual sales are less than $5 million, and
    • Your business meets industry-specific building size limitations (e.g., less than 6 stories or 100,000 sq. ft. for retail, 35,000 sq. ft. for wholesale or processing).

    What Does a Business Owners Policy (BOP) Cover?

    A Business Owners Policy (BOP) combines all the essential coverage a business owner should have into a single, convenient package, focusing on two primary areas: General Liability Insurance and Commercial Property Insurance. These two coverages are bundled to cover common risks faced by small to mid-size businesses, ranging from slip-and-fall accidents to natural disasters. While commercial property and general liability form the core of a BOP, some insurance companies may offer optional add-ons such as Business Interruption Insurance (Business Income). Let’s take a closer look into a detailed breakdown of a BOP policy:

    1. General Liability Insurance

    General liability is the most important insurance coverage you should consider. You might already have this type of insurance for your home or auto insurance policy. It’s the first line of defense against three major risks: bodily injury, property damage, and personal and advertising injury.

    • Bodily Injury: Assists with third-party medical expenses and legal costs of a lawsuit related to a covered accident. For instance, if your restaurant accidentally spills hot coffee, causing severe burns to a customer, you could be responsible for their medical bills and legal expenses.
    • Property Damage: Covers repair or replacement costs and legal defense expenses if your operation or product accidentally damages someone else’s property. For example, if a contractor’s crew accidentally ruptures a gas pipe, causing leakage, this coverage can cover repairs and potential legal bills.
    • Personal and Advertising Injury: Helps with legal defense costs, settlements, and judgments if your business harms someone’s reputation. Imagine your bakery runs an ad campaign claiming to use only organic ingredients, but a customer discovers some are artificial. They sue your bakery for false advertising. This policy covers any legal fees or potential settlements.

    2. Commercial Property Insurance

    This coverage protects your leased or owned buildings (e.g. storefronts, apartment buildings) and contents like equipment, machinery, furniture, and inventory in the event they get damaged during a covered claim. It provides financial assistance to restore or replace property to its original state.

    • Building Coverage: Protects against damage or destruction to the physical location caused by incidents like fire, wind, or a rock thrown through a window.
    • Personal Property Coverage:  Protects your business’s owned or rented equipment and personal property like large equipment, inventory, furniture, and computers, against fire damage, theft, and vandalism.

    3. Business Interruption Insurance

    Also known as loss of income or business income coverage, this coverage helps your business stay afloat if an unexpected event forces you to temporarily close your doors. It compensates for:

    • Lost Income: Covers the earnings your business would have generated if it were operational, ensuring you won’t fall behind financially.
    • Operating Expenses: Helps you manage continuing expenses like rent, payroll, and utilities when your business is unable to operate.
    • Additional Expenses: Reimburses you for any extra costs incurred while operating from a temporary location, allowing you to focus on resuming normal operations quickly.

    Is a Business Owners Policy (BOP) Right for You?

    Cost-effective: Bundling coverage in a BOP is generally cheaper than buying individual policies.
    Convenient: Managing one policy with one premium simplifies administration and paperwork.
    Comprehensive: BOPs cover common risks faced by small and medium-sized businesses.
    Well-rounded package: Ideal for small businesses with standard needs, minimizing the need for complex customization.
    Limited flexibility: Compared to individual policies, BOPs offer less customization. You may need additional policies for specialized needs not included in the standard package.
    Eligibility restrictions: BOPs aren’t available to high-risk or large businesses. Specific criteria must be met to qualify.
    Coverage exclusions: Like any insurance policy, certain perils like floods or earthquakes are not covered.

    Additional Policies to Consider Adding Alongside Your BOP

    While your Business Owner Policy (BOP) covers common property and liability risks, your needs may extend further. Here are some recommended additional coverages to add alongside your BOP:

    • Workers Compensation Insurance: In most states, this insurance is mandatory. Workers comp provides medical benefits and lost wages to employees injured on the job.
    • Commercial Auto Insurance: Protects your business vehicles and drivers with dedicated coverage. It includes coverage for property damage and bodily injury claims just like a personal auto insurance policy. Remember, your personal car insurance will not provide any coverage for business-related claims.
    • Inland Marine Insurance: Covers business property while it is in transit or stored off-premises, protecting the inventory from theft, vandalism, as well as certain weather events. Consider this coverage if your business involves transporting goods.
    • Cyber Liability Insurance: In today’s digital world, data breaches are a real threat. This coverage minimizes the financial impact of such incidents, covering costs like credit monitoring, customer notification, and potential settlements. Consider it if you handle any customer data.
    • Professional Liability Insurance: This protects your business against lawsuits alleging negligence or financial losses to clients due to your professional advice or services. Consider this if your business involves financial management, investment advice, or any form of professional consultation.
    • Commercial Umbrella Insurance: Provides an extra layer of protection beyond your existing policies by kicking in if claims exceed their coverage limits. Consider this if your business faces the potential for large liabilities.
    • Commercial Flood Insurance: Standard property insurance usually excludes floods. If your business operates in a flood-prone area, this separate coverage is vital, helping you recover from unforeseen floods and get back on your feet quickly.

    How Much Does a Business Owners Policy Cost?

    A Business Owner Policy (BOP) offers a cost-effective way to bundle essential coverages. While costs vary, expect to pay an average annual premium between $600 and $1500. Your final rate depends on factors like:

    • Business size and employee count
    • Annual revenue
    • Industry type and associated risks
    • Deductibles and coverage options

    Get a BOP Insurance Quote With AIS Insurance

    No matter your industry – retail, auto repair, restaurant, accounting, or beyond – a Business Owner Policy (BOP) can be tailored to your unique needs. Our Commercial Insurance Specialists will work with you to craft a BOP that covers exactly what your business needs and delivers peace of mind. Call (855) 919-4247 today for a quick and easy free quote.

    The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may differ from those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.