Breaking Down the Cost of Business Owners Policy (BOP) Insurance

Every small business should have a business owner’s policy (BOP). This combination policy protects the business from claims that happen from third-party accidents and replaces lost or damaged business property. The policies are cost-effective, combining two policies into one for convenience and cost-efficiency. This article takes a closer look at the factors that affect the cost of a business owner’s policy.  

The Importance of a BOP for Small and Medium Enterprises

A small business owner can never predict when a loss will occur. A customer can slip and fall on the property, getting hurt and requiring medical attention. This can result in a general liability claim. A BOP includes general liability coverage. It also includes commercial property coverage. This means that if the small business is robbed, the items taken can be replaced. Often, claims can cost thousands of dollars, which a business would have to come up with if they didn’t have the BOP in place. The BOP becomes the financial lifeline from unexpected claim costs. 

Business Owners Policy Insurance Costs on Average

While a business owner can get a BOP for as little as $500 per year, the average cost, according to The Hartford, is $1,019 annually. The cost is affected by several factors, which we will go into next. 

Factors Influencing the Cost of BOP

We’ll go over five factors that influence the cost of a BOP.

Business Size and Industry

The business size and industry affect the cost of the BOP. The bigger your business is with higher revenues, the higher the risk, and this increases the cost. Additionally, the industry you serve will affect your rate since some industries are riskier than others. 

Location and Its Impact on Premiums

Where your small business is located will affect the cost. Some places have higher crime rates and loss experiences. These factors increase the risk to the insurance carrier and, thus, cause the rates to go up. 

Coverage Limits and Policy Features

Your limits will directly affect the cost. The higher the liability limits or property coverage, the higher your rates will be. Also, if the policy includes business interruption insurance, you may be paying more for this extra policy feature. 

Claims History and Risk Assessment

One thing common among all insurance policies is that claims history affects the rate you pay. When you have more claims in your history, you will pay more for insurance. Those who are claims-free experience the best rates from insurance carriers. 

Additional Coverages and Endorsements

Depending on the insurance carrier, you may be able to add additional coverage and endorsements to your policy. You may pay an additional premium for these benefits. That would increase the cost of the insurance. 

How to Find the Best BOP Insurance for Your Business

Follow these guidelines to find the best BOP for your business. 

Evaluating and Comparing Quotes

Take the time to evaluate and compare quotes. Make sure to compare policies with like coverages so you can truly assess who has the best price. This means making sure the liability and property coverages match on the quotes. Shop around with reputable companies to see who can offer you the best rates. 

Understanding Deductibles and Their Impact on Costs

The deductible will affect your rate. The higher the deductible, the higher your claim cost. This is your responsibility to pay and the insurance company pays the rest. Those who take on more risk in a claim will get a lower premium on the policy. 

Working with Insurance Agents and Brokers

Finding a good agent or broker will help you get the best policy with as many discounts as possible. Agents and brokers work to provide quotes and show you policies from top carriers. 

How to Lower Your BOP Costs

Take a look at these ways to lower the costs of BOPs. 

Bundle Policies

Depending on the insurance carrier, you may be able to bundle the policy with another insurance policy to get a discount. This might be commercial auto or workers’ compensation or another needed policy. 

Adjust Coverage Limits

When you lower your coverage limits, you can bring down the cost of insurance. Try going for $1 million in general liability coverage rather than $5 million. This will help you save on costs. However, realize that if there is a claim for a higher amount, you are responsible for making up the difference. 

Increase Deductibles

Take on a higher deductible to save money on your BOP. This means that you will be responsible for more of the claim in the event of a loss but can save money in the meantime. 

Implement Risk Management Practices

Some insurance companies will lower the cost of insurance if you implement risk management practices. This may include safety rules and protocols, team safety meetings, and security devices. 

Review and Update Your Policy Regularly

Go over your policy at least once a year with your agent. As your business grows, so will your policy. However, over time, you may be eligible for more discounts to help you save. 

Frequently Asked Questions (FAQ)

How Often Should a Business Review Its BOP Insurance?

A business should review its BOP at least once a year. Whenever there is a significant change in your business revenues or property, you’ll want to check to make sure that your policy still covers you. 

What Are Common Exclusions in BOP Insurance?

A BOP will not cover employee injuries or employment practices liability. You’ll need separate policies for that. 

How Can I Lower My BOP Insurance Costs?

The best way to keep your BOP costs down is to remain claim-free. While you want the insurance there for you should you need it, implement practices that reduce the likelihood of a claim to remain claim-free as long as possible. 

Keep Business Owners Policy Insurance Costs Low

A BOP is a very affordable policy that covers multiple types of risks. Every business should get a BOP and do what they can to keep the costs low. This may mean reducing the risk of claims and taking on more financial responsibility with a higher deductible.