A Business Owners Policy provides prepackaged Property and Liability insurance coverage tailored to protect small and medium-sized (“Main Street”) businesses from a wide range of perils.
Types of businesses eligible for a BOP cover a wide spectrum, ranging from bakeries and Mom-and-Pop convenience stores, through dry cleaners and fast-food restaurants, to a variety of service operations, and retail and wholesale merchants. Note that some businesses — such as auto repair shops, bars, full-service restaurants, and manufacturing operations — might be ineligible for BOPs and require other types of insurance.
There are specific size criteria for BOP eligibility.
Covers losses to your building and business property. You can choose the Standard Form (“named perils”), which covers losses from perils listed in the policy. If you'd like broader coverage — at a higher premium — the Special Form (“all risk”) covers losses from all causes unless the policy specifically excludes them.
Property coverage includes your building and premises, permanently installed machinery and equipment (heating and air conditioning equipment, etc.), and business personal property (furniture, business stock, and property stored off premises).
You'll also have coverage against losses from crime (theft, forgery, counterfeiting, etc.) and for income lost when your business can't operate at full strength (Business Interruption).
Covers the legal liability of your business for monetary losses to third parties from a variety of causes:
- Bodily Injury — repays visitors injured on your premises or customers injured by a product you manufacture or sell.
- Personal Injury — covers violations of privacy, false imprisonment (for example, detaining a suspected shoplifter), wrongful eviction, etc.
- Advertising Injury — pays for losses due to the written or spoken words of you or your employees (slander, libel, copyright infringement, etc.).
For an extra premium, you can beef up your BOP by adding such coverages as:
- Employee Dishonesty: Covers losses to money, securities, and other property due to employee theft.
- Burglary and Robbery (added to the Standard Form): Covers loss or damage to your business personal property, including money and securities, on and off premises.
- Mechanical Breakdown: Covers property damage from the failure of boilers, heating and air-conditioning systems, or electrical equipment.
- Outdoor signs.
Excellent Basic Coverage For A Small Business
Properly insuring your business involves a wide variety of coverages and can mean purchasing a number of different policies. Fortunately, most small and even medium sized business owners can cover themselves by purchasing a package policy known as a Business Owner’s Policy or BOP. A BOP is known as a package policy because it combines a variety of commonly needed coverages into one. It is similar to your homeowner’s policy which combines a comprehensive liability policy with a variety of property coverages. Also, like a homeowner’s policy, it can be customized to broaden the coverage in areas you need.
Liability Coverage In Your BOP
The Liability Coverage in a BOP is very similar to what you will find in a General Liability policy. Because of its package “one size fits all” nature, a BOP is more limited in its coverage than what is available in a stand-alone policy. Even so, the average small business should be able to purchase $1 million to $2 million limits. Not all policies are created equal, however, so be sure and read the policy and work with your agent to make sure that any special exposures your business faces are covered. If not, the insurance company may offer the additional coverage as an add-on to the BOP, or you may need to purchase it separately. One example of a coverage that is typically not included in a BOP is Professional Liability Coverage.
Property Coverage In Your BOP
Most of the basic Property Coverages will be included in the BOP, including the real property, equipment, inventory, etc. You should also be able to include Business Interruption Coverage and basic Employee Dishonesty Coverage in your Business Owners Package. Certain business risks may need to be purchased separately like Product Liability. In addition, if your business depends on specialized equipment, like a dry cleaner, the basic coverage in a BOP may not be sufficient.