A business owner policy is a small business insurance policy that combines insurance coverage for property damage and common liability risks into a single package. Here’s how it may benefit your business.
Insurance is a subject that small business owners don’t like to think about. It’s a yearly expense for something you hope you’ll never have to use. In fact, many small businesses neglect to carry any type of business insurance. And that’s unfortunate. Accidents, thefts, fires, and disasters can and do happen to small businesses, and most small businesses find it difficult or impossible to recover from such financial losses if they don’t have insurance.
As a business owner, you’ve invested significant amounts of time, money, and love into making it a success. That’s why you need to protect your business with insurance against common risks.
For many small business owners, the best way to do that is with a business owner’s policy. Also known as a BOP, a business owner policy is a type of commercial business insurance that combines several types of business insurance into one package. Along with property insurance, a BOP includes liability protection (but not professional liability) and often includes business interruption insurance. As a bonus, purchasing a BOP tends to be more affordable than buying different types of insurance on an a la carte basis.
Who Needs a Business Owner Policy and Why?
Every business owner needs insurance. While there are many different types of insurance available to cover such threats, most small and midsized businesses (and sometimes home businesses) can cover the major threats under a single business owner policy. Additionally, different businesses can tailor their policies to meet their specific needs. For example, you could buy additional coverage (called riders or endorsements) for specific liabilities such as data breaches, equipment breakdowns, off-premises services, professional liability, and other special needs.
Most low-risk businesses with less than $1 million in annual sales can qualify for a BOP. But depending on the type of business you run, you may have to shop around or rely on a good independent insurance broker to do so on your behalf. That’s because different insurance providers often have specific rules and regulations concerning a business’s size, location, type, and income level. For example, some providers only cover companies that do all their business on-site. Still, others restrict coverage to businesses with fewer than 100 employees or companies earning less than $1 million in annual revenue. However, if your company does qualify for a BOP, it can play a significant role in ensuring your business’s longevity and success.
What Do Business Owner Policies Cover?
Business owner policies cover a wide range of liabilities that affect the average small or medium-sized business owner. The basic BOP includes the following types of coverage:
- Commercial property insurance: Designed to protect your building or the office space you rent, equipment, and products, this type of insurance safeguards physical assets and ensures you can recover in the event of a theft or catastrophe. Some of the items covered by this insurance type include computers, desks, furniture, exterior signs, and even important documents.
- General liability insurance: Designed to protect your employees and customers, general liability insurance provides for things like slip and fall injuries and accidental damage of someone else’s property.
- Business income insurance (also called business interruption insurance): Now and then damage by a covered clause in an insurance policy (fire, for example) requires a business to close down until repairs can be completed. Business income insurance helps the owner replace income lost during that downtime so they can continue to pay ongoing costs such as loans, rents, or leases.
Evaluating and Customizing BOPs
The specifics included in a business owner’s policy will depend on the type of business you run and the insurance provider. Before choosing one, make a list of the threats and liabilities for which you need coverage, and go over your list with the insurance company or your broker. If the threats you want covered aren’t included ask about getting an add-on rider or endorsement to cover them. Such add-on items are attached to a basic BOP (at extra cost) in order to address specific issues and considerations. Here are just a few of the additional coverage options available to SMBs:
- Accounts receivable: Unpaid invoices are one of the banes of small business owners. Accounts receivable insurance can help make up for these financial losses and keep your company in the black.
- Cyber liability and data breach: Cybercrime is a new and very real problem for modern business owners. Fortunately, this type of insurance is there to protect companies from online attacks and electronic data loss.
- Equipment breakdown: Expensive computers and phone systems have a tendency to break down at the worst possible times. Protect your equipment and your business with this optional insurance add on.
- Personal and advertising injury: Depending on the type of business you operate, you may need to purchase insurance for issues related to copyright infringement and libel. Additionally, this insurance type covers false arrest, malicious prosecution, and wrongful eviction.
- Rented vehicles: Most BOPs don’t include coverage for vehicles. This insurance provides owners with liability coverages for cars they lease or borrow.
Where Do You Get a BOP?
Once you’ve determined that a business owner policy is right for you, it’s time to begin shopping for coverage. The good news is that a number of providers offer BOPs and endorsements to meet your company’s needs. If you already have a preferred insurance provider, you can start by checking out their BOP offerings. Or, consult a local independent business insurance agent. Additionally, insurance web sites enable customers to compare multiple quotes from business owner policy insurance carriers in their region.
How Much Do Business Owner Policies Cost?
As you might expect, BOP pricing varies significantly based on a variety of factors. The type of business you run, location, and even your annual sales may influence the pricing, as do any add-on endorsements you require. Because they come with a greater risk of customer injury, restaurants and construction companies tend to have higher premiums than tech companies and architecture firms. Businesses with expensive equipment may also be more expensive to insure. Business owner policies typically range from $500 to $3500 per year, with the average business spending around $1200 annually.
Other Insurance Needs
A Business Owner Policy may not be the only kind of insurance your small business needs. If you have employees, in most states you’ll need workers’ compensation insurance. If you or your employees drive a vehicle in the course of business, you are likely to need auto insurance for the business. Malpractice and errors and omissions insurance are other possible needs, depending on your business. A local insurance broker who works with businesses should be able to help you pinpoint your specific needs.