Business Owners Policy Insurance: What It Covers and Why It Matters

If you are considering getting business insurance, you may be confused as to what type of policy you need. A business owner’s policy (BOP) is a combination policy that has two main types of insurance in it: general liability and commercial property. Some policies even have business interruption insurance. Getting a BOP takes the guesswork out of what type of policy to prioritize as get. 

What is Business Owners Policy (BOP)?

A business owner’s policy (BOP) is a policy that includes more than one of other common business insurance policies. Most BOPs will at least have general liability and commercial property. Some BOPs even contain business interruption insurance to make the policy a combination of three common business policies. This means it covers third-party losses and commercial property losses and pays expenses during downtime when there is a loss. Some carriers will allow certain professions to add professional liability insurance as an endorsement.  

Who Can Benefit From a Business Owners Policy?

Just about every business owner can benefit from having a BOP. This is a common policy because every business is at risk for third-party losses and commercial property losses. Another reason for its popularity is its cost. A BOP costs less than getting the two policies independently. The starting price of a BOP is $500 a year. 

Components of BOP

Let’s take a closer look at what makes up a BOP. 

General Liability Insurance

General liability insurance covers third-party losses where your company may be responsible for the loss. The most common example is when a consumer slips and falls on your property, requiring medical attention for their injuries. Another common loss is where a company’s equipment or work damages a customer’s property – say a tree trimmer causing the tree to fall on the roof of the house. These damages can be costly and the insurance protects the business from financial loss. 

Commercial Property Insurance

Commercial property insurance is first-party insurance. It pays to repair or replace items owned by the company that are lost or damaged in theft, fire, or water damage from a pipe bursting. Covered property includes office furniture, inventory, supplies, and computer equipment. The insurance will assess the damage and pay for repairs or replacement of items. 

Business Interruption Insurance

When your business experiences a property loss, it likely will have to close its doors until the claim is resolved and damaged items are replaced. Business interruption insurance pays the basic expenses of the company while the business is closed so it remains financially solvent. Expenses continue even during a loss – you’ll have to pay your lease payment even during a loss. Business interruption pays this while there is no income coming in. 

Additional Features and Endorsements

Some insurance carriers will allow you to add endorsements for additional coverage to the BOP for an added premium. This may include cyber liability coverage and electronic data liability coverage. You may also add inland marine insurance to the policy for added protection. 

Limitations and Exclusions of a BOP

A BOP isn’t for every business. Most insurance companies limit BOPs to small businesses with revenues under $5 million a year (some even less). There may also be limitations to riskier industries where claims are more prevalent. 

Advantages of a Business Owners Policy

Let’s look at some of the advantages of the BOP. 

Financial Protection

The main point of the BOP is to provide financial protection for the small business owner. Losses are expensive and can financially burden a business that doesn’t have insurance to cover it. The BOP does just that. 

Streamline Coverage

The BOP streamlines coverage so that a business doesn’t need to balance multiple policies. By having one policy cover several risks, the business eliminates some gaps that can happen when you buy individual policies. 

Cost-Effective

Because the underwriting is done in one session, the BOP is able to save the small business money compared to having multiple policies. It is a cost-effective solution for small businesses. 

How to Obtain a Business Owners Policy

Here’s how to get a BOP for your business. 

Evaluating Your Insurance Needs

Evaluate the needs of your business and determine how much coverage you need for a risk. This may include assessing the risk of third-party accidents and itemizing business assets to know how much protection you need. 

Choosing an Insurance Provider

Choose a reputable insurance provider that has good ratings from third-party agencies such as AM Best. Shop the same policy coverages around multiple carriers to find the best rate for your policy. 

The Application Process

Take the time to go through the application process with the agent. This is an interview-style process that goes over the main risks of your company. You’ll need company data such as revenues, employee count, and property asset values. 

Feel Confident with Business Owners Policy Insurance

Small business owners can feel confident in coverage when they buy a BOP. The BOP covers the most common claims issues and gives a business owner the confidence to continue business operations. BOPs are cost-effective and will often pay for themselves with one claim.