The business owner faces many risks. Insurance for the business must balance affordability with the ability to control as much risk as possible.
Larger businesses and those that have been in existence for many years have a track record and experience to know what particular categories of risk need greater coverage than others. Often, those companies will have a dedicated team of risk managers and safety experts who, working with insurance brokers, custom design a business insurance program for the company tailored to the needs of the business.
And that is great for the large company. What about the small business? Small businesses make up 97% of all employer firms and employ over half of the United States workforce according to the Small Business Administration. This is a huge market for insurers. There must be special business insurance products for the little guy, right?
There is. The Business Owners Policy (BOP) is a business insurance product sold by nearly every commercial business insurer. Sometimes it may be sold by different marketing names; however, the clauses and coverages in the BOP are usually standardized ISO clauses and coverages and similar from one company to the next. As always, confer with your insurance professional regarding any company's specific product. It is essentially a one-stop business insurance policy for the medium to smaller business. It is a "package policy." While there are other "package" policies available in the market, the Businessowner Policy is perhaps the most common.
The Businessowner Policy may differ from insurer to insurer, and policy to policy, but generally consists of a package of the following coverages:
- Property Coverage - The Businessowner Policy will provide property coverage for buildings, structures, and improvements owned by the business or in the control of the business as long as the property is identified on the policy (in the policy declarations). This means if your business leases its location the location can be named and covered under the policy. There are some selections to be made with this coverage. Will you insure for actual cash value or replacement value? Also, while the BOP is often standardized, definitions of what is covered and what is not may be written in such a way as to confuse the typical policy holder. So, make sure your Businessowner policy property coverage is fully understood.
- Liability Coverage - The Businessowner Policy will provide liability coverage for damage that you are legally obligated for as a result of “bodily injury,” “property damage,” or “advertising injury” to others. There are entire books written about liability coverage and the courts are filled with disputes about liability coverage. So, again, confer with your insurance professional regarding what the particular BOP you are considering actually covers. Two critical components of the BOP liability coverage are medical payments and defense reimbursement. Medical payments coverage is a low amount "no fault" coverage providing medical expenses to third-parties for bodily injury on the business premises. Defense costs coverage provides an attorney and litigation cost reimbursement. Both coverages can eliminate nuisance claims at the business.
- Contents Coverage - The Businessowner Policy will provide contents coverage for the "contents" of your company's structures. Things like the furniture, equipment, leased goods, and other contents. But, there are also exclusions that are pretty important like money and bullion. The typical BOP will not cover the loss of money, stocks, or gold as contents.
- Business Income - The Businessowner Policy will provide business income coverage for income and extra expenses incurred after a disaster. This can keep your business functioning in the event of a catastrophic loss.
- Other Coverages - One of the reasons the BOP can be so important to the small business is the whole host of miscellaneous coverages provided in the policy. This is especially true for those Businessowner Policies tailored to particular businesses. A good, market-leading insurer's BOP usually includes a number of nuisance coverages covering very serious risks faced by small businesses. For example, forgery, counterfeit money loss coverage, glass breakage, and a number of other coverages (that you probably did not even consider as a risk).
While the Businessowner Policy is pretty extensive, it does not provide all of the coverage needed by a company. For example, workers' compensation coverage and commercial auto coverage are two examples of must have coverages not provided by the Businessowner Policy.