If you need insurance coverage for lots of different risks in one package, consider a business owner’s policy (BOP). In this post, we’ll cover how a BOP can help safeguard your small business, and how to customize a policy to fit your particular needs.
What is a business owner’s policy?
A business owner’s policy is business insurance that combines general liability and property insurance in one package. This insurance bundle usually covers bodily injury and property damage for yourself and others. So, not only are your clients protected, but you are as well. Plus, a BOP is often more affordable than purchasing individual policies, which makes it convenient and cost-effective.
For many small business owners, purchasing a general liability (GL) policy by itself is a go-to move. However, general liability insurance doesn’t normally protect you when it comes to your own property,
What does it cover?
A BOP covers four main things.
Bodily injury (operations)
Better known as the “fall and slip” scenario, this coverage includes bodily injuries at a job site. For example, let’s say a delivery person slips on leaking water while they drop off supplies. After they sued your company, a BOP would help to cover the delivery person’s medical bills, loss of wages, and other costs.
Bodily injury (product)
A BOP covers bodily injury claims that arise from using the product from an insured company. One example of this would be a toddler choking on a small object included with the product because no warning labels were on the product’s packaging.
Damage to your property
One of the most common “damage to your business property” claims is an office fire, which not only damages your building, but causes loss of business too. A BOP would help to cover your costs in scenarios like this.
Damage to the property of others in your care
Many times, damage to someone else’s property has to do with rented office space. Some companies opt to rent space for their operations rather than buying real estate. In this situation, your business plays the part of a tenant. So, if you cause any damage to your landlord’s property, a BOP would help to cover the loss. But this particular coverage addresses other situations, as well.
For example, perhaps a contractor mistakenly busts a water line on the third level while renovating someone’s home. Not only does the pipe need repairing, but the wet floor and the few stories underneath it may face damage, too. Although the responsibility falls on the contractor, all of this property damage would be tough to handle out-of-pocket. This situation is when a BOP would step in to help cover the loss.
Keep in mind that some industries require particular add-ons to help bolster their financial safety net. It’s essential to know your specific exposures so that you cover your business adequately. Consider that the contractor mentioned above and a commercial landlord face different risks. As a result, they’ll each have different needs. A knowledgeable insurance broker can help you pinpoint the best coverage for your industry.
What does BOP insurance not cover?
Similar to other commercial insurance policies, a business owner’s policy has its limits, too. Although plenty of business owners arrange for additional coverage components, such as forgery or mechanical breakdown, the following are typically not covered by BOP:
Specific claims, including those that arise from professional services you perform
Client damages if you provide inaccurate or incomplete advice to the client
Employee injuries (a BOP is not workers compensation insurance)
Employee discrimination lawsuits
To safeguard your business adequately, you must understand the specific needs and loopholes your business faces. A seasoned insurance broker or agent can help you secure the right policy so that all your exposures are covered.
Who needs it?
Most small businesses will benefit from a BOP because well-rounded and affordable.
But in particular, you should ask yourself these five questions to decide if BOP is a good fit for you.
Do you need a general liability policy? Most small businesses need a GL policy because they face third-party risk, such as the notorious slip-and-fall accident. But think about who covers you should a loss occur to you specifically, such as a fire at the office.
Do you own property equipment, such as computers, inventory, printers, furniture, etc.? Dealing with damaged or broken equipment could quickly set your business back financially or put it on indefinite standby.
Do you have employees who could potentially act dishonestly? Do you work in an industry with a reputation for employee theft (usually lower-wage jobs)? Or do you have sensitive information that if stolen, would hurt your company?
Do you own the building where you conduct business? If you run the risk of having your own property damaged, a BOP will be especially useful for you.
Do you work with a lot of customer or client data? Being responsible for other people’s information always sets the professional stakes a bit higher. If that information is lost or stolen, you’re held accountable for any mess it makes.
What is Business Interruption Insurance?
Should your business experience a catastrophe, such as a fire or natural disaster, business interruption insurance works to replace the loss of business income that is lost in the calamity.
Keep in mind that this particular policy isn’t sold separately. Instead, it’s typically added on to a policy or included in a comprehensive package.
Let’s say you have an office fire. You’d have to relocate employees, somehow keep paying them, and figure out a way to keep normal business operations going. Business interruption insurance can ease these sorts of headaches. It covers operating expenses, a move to a temporary location, and things like payroll, taxes, and loan payments.
Business interruption insurance also covers you if “government actions” cause an interruption to your business.
Best places to get a Business Owners Policy
As your small business evolves, it can be tricky knowing the coverage you genuinely need. A broker can help you to identify your professional exposures, pinpointing all the “what ifs” your particular industry faces. Finding the right commercial insurance broker can be a challenge but here are a few tips on the options available:
Local Broker - if you prefer to discuss your insurance needs in person, a brick and mortar broker could be a good fit. They’ll walk you through what BOP options are available for your specific business type. However, if your business plans to expand (or sell online for example) local brokers may not have access to the best rates or may run into licensing issues.
**Local Agent **- agents work in the same way that brokers do except they only work for a single insurance company. As a result, you may miss out on the best rates as carriers are not competing for your business. However, in some cases, brokers will only work with a specific type of company or may have minimum requirements that rule you out. A specialized agent will serve as an expert in your industry. What’s more; is that they may have less stringent stipulations for choosing clients, making them your best bet.
Online Broker - there are a number of digital-focused insurance brokers out there. These brokers generally have a smooth application process and quick turnaround times with their focus on technology. This can often lead to significant savings on premiums but be careful of robobrokers that offer deals that seem too good to be true. That’s usually the case.
Most states require brokers to have a license and maintain continuing education requirements to sell or service insurance. If you do business in multiple states, be sure your broker has the proper licenses to secure your coverage in those states.
Carl is the COO and Co-Founder of Cover Small Business, the small business arm of Founder Shield, a digital insurance brokerage for high growth companies. Whether you’re an independent contractor or small business owner, we connect you directly with insurance carriers that specialize in your industry. We’ve streamlined communication to create a faster, leaner style of underwriting to deliver specialized coverage at affordable rates.