Business owners have a lot to consider. From creating a business plan, building a website, and hiring employees to developing a cybersecurity plan, and purchasing the right insurance coverages to protect your venture. This can be an overwhelming process as you want to ensure your business is protected from any risk your business might face. One coverage option, a business owner’s policy (BOP), can take the guesswork out of the process. In this post, we’ll explain what a BOP is and why it could be a great option for your business.
What is a Business Owners Policy (BOP)?
A BOP bundles several types of coverage into one package — similar to the way a homeowner’s policy works, but it is designed for small and medium-sized businesses. BOP’s are packaged for businesses that generally face the same type of risks. For example, a restaurant BOP can be designed and packaged differently than a manufacturing BOP.
Typically, a BOP covers a business’s equipment and merchandise while also covering everything that a general liability policy covers. It covers equipment, furniture, and supplies in up to five separate locations, including rented and leased equipment.
A BOP generally combines the following types of coverage into one convenient bundle:
- Commercial property insurance: Covers losses to property from common perils. It also covers office equipment, furniture, inventory, machinery, raw materials, computers and anything else that is vital to business operations.
- General liability insurance: Covers a company’s legal responsibility for any harm it may cause to others up to the policy limit. It also covers attorney fees and medical bills for anyone injured by the company.
- Business interruption insurance: Reimburses for loss of income if a covered disaster interferes with the successful operation of the business.
What Isn’t Covered in a BOP?
Although a BOP is a convenient insurance option for small to mid-sized businesses, it does not cover professional liability, auto insurance, and workers’ compensation. Workers’ life, health and disability coverage are also excluded. For those exclusions, business owners can purchase separate coverage to add to the BOP.
Other risks that a BOP does not cover include the following:
- Crime coverage: Although it is minimal, crime coverage can be added to a BOP to cover losses as a result of a crime, such as employee dishonesty and computer fraud. Typical crime coverage ranges between $1,000 and $5,000.
- Data breach coverage: This coverage is commonly added to BOPs to help remedy the following losses resulting from data breaches:
- Notifying impacted individuals
- Hiring crisis communication consultants
- Defense and settlement costs from associated lawsuits
- Replacement of lost income
- Extortion and ransom payments
- Errors and omissions (E&O) coverage: Businesses that provide services for a fee can be sued by customers who claim that they were harmed because the business failed to perform its job properly. E&O coverage pays for any judgment for which the insured is found legally liable, up to the policy limit. It also covers legal defense costs.
- Loss of Business Income Insurance: Covers your net profit, or the “Actual Loss Sustained” if you go out of business for a period of time.
How Do I Know If I Am Eligible for a BOP?
Small to medium-sized businesses need to meet specific criteria to be eligible for a BOP. When determining eligibility, insurers consider factors that include the type of business, size of its primary location, class of business and revenue.
Premiums for BOP policies are based on eligibility factors, as well as financial stability, building construction, security features and fire hazards.
Businesses that have the following characteristics are ideal candidates for a BOP:
- Operate in a physical location, whether home-based or outside the home
- Have assets that can be stolen, including products, cash, furniture and digital property
- Are at a high risk for lawsuits
- Employ less than 100 employees and have less than $5 million in sales
Businesses such as manufacturers, religious organizations, apartment management companies, restaurants, technology consultants, wholesalers, and retailers commonly purchase BOPs to protect from losses not covered by general liability insurance.
Our commercial insurance team at Eastern Insurance can work with you and your team to put together a business owner’s policy that covers the unique risks and liabilities of your business. To contact a member of our team, or to request an insurance consultation online, please visit our website or call us at (800) 333-7234 (Option 3).