Insuring your business is one of the wisest actions you can take to protect the financial investment and sweat equity you’ve put into it.
But what type of insurance do you need? And isn’t the whole business of getting protected complicated, expensive and time-consuming, when there are so many other demands on your plate?
Well, actually, there’s a simple, cost-effective insurance solution that just might be tailor made for you — a business owners policy, or BOP for short.
It’s simple and price-competitive because it rolls the most important insurance protections into a single policy. And if you do need any additional coverage that falls outside your BOP, it’s straightforward to add this or arrange separate insurance — provided you have a good, knowledgeable insurance professional to advise you.
What’s Covered in a BOP?
In very simply terms, a business owners policy provides coverage for all the main property and liability risks you face. It’s ideally suited to smaller and medium-sized businesses (up to 100 employees and $5 million revenue) because it avoids some of the complexities involved in specialist coverage for larger organizations.
There are three main components:
- Business property insurance that covers the structure of buildings you own and the contents of your building, whether you own it or not. Protections include losses arising from incidents like fires, theft, vandalism, and protection for equipment, machinery and inventory. Personal property can also be insured.
Most insurers offer two different levels of property coverage — standard and enhanced or special coverage. You would need to discuss this with your agent to ensure the risks you face are properly covered.
- Business liability insurance — protection against many of the legal risks most businesses face. This would include, for example, costs relating to:
- an injury or damage a visitor suffers on your premises.
- an off-site injury to a third party for which your business is held responsible.
- injury or damage caused by defective products, faulty installations or mistakes and failures in your services.
- damage caused by erroneous advertising, defamation or copyright infringement
This protection includes legal defense and settlement costs up to the limits specified in the policy.
- Protection for loss of income following a disruption of your business caused by perils such as a fire or other catastrophe. It can include the cost of setting up and operating from a different, temporary location as well as certain payments to employees.
These days, many customized BOPs also include coverage of costs relating to data breaches — the loss of confidential information about customers and certain aspects of your business. This is increasingly important because statistics show that small and medium businesses (SMBs) are most at risk and least prepared for handling breaches.
Data breach insurance covers the costs of notifying victims, and investigating and rectifying the source of the breach.
What Isn’t Covered in a BOP?
A number of risks fall outside the scope of a BOP, including commercial vehicle insurance, workers compensation coverage (a mandatory requirement in Nevada and California) and professional liability (or errors and omissions) insurance.
Health insurance also is not included in a BOP. Group coverage is not a legal requirement for small businesses with less than 50 employees in Nevada or California, but many firms do offer it, and it provides a valuable competitive advantage. To learn about group health insurance plans for SMBs, please contact us.
Furthermore, some types of businesses may not be eligible for a BOP because of the specific risks they face. Your agent can advise on this.
Do I Need a BOP or Separate Business Coverages?
In general, a business owners policy will cost you less than if you bought the component coverages separately. And, to a great extent, policies are customizable, through endorsements, to meet the specific requirements of individual firms.
For instance, you can add other liability elements such as employer practices liability (EPLI), data breach, employee dishonesty and some of the other protections mentioned above, such as professional liability.
Is a BOP Enough?
All insurance policies, including BOPs, are subject to financial limits set by the insurer. With general liability, for example, standard coverage limits would usually be pegged at $1 million per incident and $2 million total in any one year. These limits could be raised to $2 million and $4 million respectively.
Although the limits may be flexible — higher payout limits obviously cost more — there’s another route to increasing your protection.
This is known as umbrella insurance. It’s a low-cost policy that kicks in if your standard coverage limits are breached through a claim. The risk of this happening might be low, which is why umbrella premiums are also low.
But if the worst ever happens, the umbrella policy has you protected. Without it, you would have to meet any additional claim costs out of your own resources.
Umbrella insurance may also protect you against certain risks not included in your BOP and may even be able to meet deductible amounts on your standard policy. It is well worth considering.
If you have questions about business insurance in general and BOPs in particular, if you want to review your existing policies, or if you’re just starting out, you
should speak to your insurance agent or broker.
Of course, you need a good, knowledgeable agent to put the correct pieces in place for you. In that case, you need look no further than the friendly experts at Park Family Insurance.
If you think we can help you, please get in touch.