Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 5 minutes
A BOP is often a strong fit for eligible small and mid-sized businesses. Eligibility varies by carrier, industry, revenue, payroll, and loss profile. It can be cost-effective, but it is not automatically the best option for every business. You typically get commercial property, general liability, and business income coverage in one policy.
Claims are may happen whether you have coverage or not. You want to have the coverage that is necessary to keep your business safe and sound, or you could be forced to close your doors.
Real-world losses often seem mild at first. This might be a leaky pipe, a slip and fall, or a burglary. You might think you have the costs under control without insurance, but most claims can amount to thousands of dollars, which you are not going to be able to pay out of pocket.
Why Many Small Businesses Choose a BOP
There are many reasons that a BOP is the perfect way to get your business insurance under control. General liability and property coverage are often required by leases, lender terms, client contracts, or licensing rules, but not universally by law for every business. These coverages can be far more expensive when they are paid for as individual policies. Bundling can save you lots of cash over the course of any given insurance period.
The U.S. has 36.2 million small businesses, and they account for almost 46 percent of private sector employment. Small businesses are essential to the American economy, but you can only contribute to this part of the workforce if you are able to afford to pay for your insurance protections.
What Coverage is Included in a BOP?
A Business Owners Policy (BOP) typically combines several core coverages into one package. While the exact terms vary by insurer, most BOPs are built around three primary protections. Understanding how each works is critical before relying on the policy.
General Liability Coverage
This coverage is the basic policy that all businesses may need, regardless of the industry which they operate in. This policy may handle things like customer injuries, legal fees if you are sued, and property damage. Third-party bodily injury or property damage caused by your product or completed work may also be covered under products-completed operations, subject to policy exclusions and limits.
Commercial Property Coverage
This part of your BOP covers you if your building or your personal property is damaged due to something like fire or theft. Burglary losses, signage damage due to storms, and fire losses are the most common reasons that people access this portion of their insurance policy.
Standard BOP and commercial property forms usually do not cover flood damage. But the reason is not simply because FEMA offers it. Flood insurance is available through the National Flood Insurance Program and also through private market options. Some insurers include equipment breakdown in their BOP package, while others offer it by endorsement or through related property forms.
Business Income and Extra Costs
Business income coverage is usually triggered by a covered loss, typically direct physical loss or damage to insured property. Off-premises utility interruption, such as a power outage away from your location, often requires a separate utility services or off-premises utility endorsement.
Business income coverage can help replace lost income and pay continuing expenses such as payroll or rent when a covered property loss forces a temporary shutdown. Extra expense coverage can help with temporary relocation and other added costs needed to keep operating. Coverage periods, waiting periods, and triggers vary by policy.
Disasters are becoming increasingly common. Standard business income policies generally require direct physical loss or damage. Many pandemic shutdown losses did not meet that trigger under standard policy language.
Common Optional Coverages to Consider
Crime, cyber, hired and non-owned auto, EPLI, and E&O are usually not automatically included in a BOP. These coverages are typically available as optional endorsements or carrier-specific enhancements, and availability can vary by insurer and business type.
How Can I Choose the Right BOP?
You want to start with the core coverages your business actually needs based on your operations, contracts, and legal requirements. If you need insurance to lease a building, you should carefully review your landlord’s insurance requirements before purchasing coverage. Be sure that you cover yourself for the maximum possible coverage situation that could crop up for your business. Be sure as well that you know the replacement costs for things like inventory, equipment, and signage on your property. When evaluating business income insurance, you should carefully assess your operating expenses, often referred to as your burn rate, along with the estimated time it would take to repair or replace damaged property and resume normal operations.
Before binding any policy, make sure all business locations and operations are accurately listed in your quote and reflected correctly in the policy. Be certain that your business property is reflected correctly in the policy. Also check that you have endorsements for additional coverage that you need to protect your business correctly.
If you are not certain about the right choices to make for your BOP policy limits and coverages, your insurance agent should be able to help. The team at USA Business Insurance can help you to find the right balance of coverage for your company. Whether you are just starting out or you are looking for ways to save some money on essential policies, our team can help you get access to the perfect insurance coverages for your needs and goals.
