What Is a Business Owners Policy?
Coverwallet | 08/12/2020 | Business Owners Policy
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A Business Owners Policy packages together several policies to offer small and mid-sized business owners one convenient policy to protect themselves. It simplifies coverage needs by combining two policies that most businesses need – property and liability – while offering savings over purchasing each policy separately. Business Interruption Insurance is also frequently included in a BOP.
Businesses can tailor a BOP to meet the unique needs of their industry or situation by adding additional optional coverages. One of the most popular optional coverages to add to a BOP is data breach coverage. If your business stores or handles private customer information, you can add coverage to protect yourself in case of a data breach.
A Business Owners Policy typically includes three types of insurance: Property Insurance, Business Interruption Insurance and liability protection. There are additional, optional coverages you can add to tailor the policy to fit your business’s specific needs, such as data breach coverage.
Property Insurance insures all types of physical property, from a building you may own or lease to office equipment and product inventory.
Business Interruption Insurance covers the loss of income resulting from a disaster (like a fire) that disrupts the operations of your business. This type of insurance will come in handy when you have the added expense of operating out of a temporary location after a catastrophe, or when you need to continue to meet financial obligations (like rent or payroll) when you had to suspend operations for a covered reason.
Liability Insurance protects your business from lawsuits as a result of things that you or your employees do (or fail to do) that cause bodily injury or property damage to others in the course of business. That could include defective products, mistakes made in servicing a customer and faulty installations. Coverage should also extend to the cost of your defense, since a business can be sued even if it did nothing wrong, and defense can be expensive.
Data breach coverage is frequently added to a Business Owners Policy, and will help you remedy data breach situations as quickly as possibly. This addition would cover the cost of things like notification of impacted individuals, the hiring of a public relations/crisis communications consultant or credit monitoring services.
Data breach coverage is broad, and can even cover you if private data is stored internationally. In addition to the coverage mentioned above, this addition to your BOP could cover defense and settlement costs from resulting lawsuits, replacement of lost income due to a covered data breach, and extortion expenses or ransom payments from attackers. A good policy will also protect your business from data breaches that occurred prior to the policy effective date.
Another additional optional coverage many business owners choose to add to their BOP is Professional Liability/Errors and Omissions Insurance. This type of insurance is important if you provide services for a fee to customers, as they can hold you liable for damages that they believe are the result of an error (or omission) on your part. Even if you’ve done nothing wrong, your business can still be sued by a customer claiming a negligent act. Professional Liability Insurance will cover defense costs in this case.
Who Is Covered by Business Owners Policy Insurance?
Business and Employees
Your business and all employees will be covered for claims that arise claiming bodily injury or property damage to a third party caused by the business. Additionally, your business property will be covered, so you can replace it should a covered event happen.
Parties to a Contract
If you enter into a contract for work and a party asks to be listed as additional insured on your policy you can do that here, that way if a claim arises out of your work, they will come to your policy first.
If you sell products or rent a piece of equipment, it is likely that the supplier will ask for you to indemnify them if a claim results with that product or the equipment is damaged.
Do I Need a Business Owners Policy?
Most small business owners should purchase a BOP because it’s the easiest and most affordable way to achieve broad coverage.
A BOP comes in handy if:
Your business has a physical location, like a store, apartment building or an office. If your business is located outside of your home (or even, in some cases, if it is home-based), you likely should consider a BOP.
You have assets that could be damaged or stolen. That includes furniture, cash, product inventory and office equipment as well as digital assets, like customer data.
Your business it at risk for lawsuits. If customers visit your place of work, for example, they could become injured while on the premises and sue you.
You have less than 100 employees and $5 million in sales.
Many small businesses can benefit from having a Business Owners Policy in place to protect themselves from unexpected financial losses that aren’t covered by General Liability Insurance. The types of businesses that frequently purchase Business Owners Policies include: Manufacturers, Offices, Religious organizations, Buildings, Consumer services, Apartment, buildings, Restaurants, Technology consultants and solutions providers
Wholesalers and Retail stores.
However, not every business is eligible for a BOP. Eligibility requirements vary among insurance providers. Here’s a general overview of what is considered when determining eligibility:
Certain class of business (eligible classes includes small restaurants, stores, office- or service-based businesses, wholesale distributors, apartments and independent contractors).
Where you conduct the majority of business operations (most policies require your business to complete most of its business on the premises)
The size of your business’s primary location
How Much Does a Business Owners Policy Cost?
Purchasing a policy bundle is typically more affordable than purchasing General Liability and Property Insurance separately. Most providers will offer a discount of 15 to 20 percent.
The premium for a BOP will be determined based on a number of factors, including your business’s location, risk factors, number of employees and size. Premiums can range anywhere from $500 to $15,000.
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