Business owner insurance

Business Owners Insurance in the USA

What is a BOP (Business Owners Policy)?

You might search the internet for business insurance or talk to insurance brokers and constantly hear the term “BOP policy.” The insurance industry often uses abbreviations and other shortcuts. BOP stands for Business Owners Policy, and most insurance companies use this form of policy to insure many types of small businesses.

In fact, in recent years, the size of firms eligible for BOP coverage and the types of firms eligible for BOP insurance have expanded to include larger firms across a wide range of industries.

BOP (Business Owners Policy) is a package policy because it bundles property insurance with liability coverage to create the foundation or core of this policy. To this core, most insurers add various additional coverages that business owners often need: crime risks, property extension coverages, and liability extensions. The advantage of a BOP policy is that it is flexible, comprehensive, and competitively priced, making it an easy choice for most business owners to insure their most common risks.

However, not all BOP (Business Owners Policy) policies are created equal. The form of each insurer’s policy differs from one to another. Even within the same insurance company, you may have different levels of additional coverages and options.

Recently, a client mentioned that they received a better offer from a competing broker for their BOP policy but wasn’t sure if it was equal or more advantageous. So they asked me to review the competing offer and see how it compared to our existing policy. At first, I was grateful that the client trusted me to conduct this review rather than simply switching to a cheaper alternative. When we reviewed the policies, it became clear that this was an “apples and oranges” comparison. The cheaper BOP (Business Owners Policy) had lower property and liability limits than our policy. Sublimits, or additional coverage for many critical options, were somewhere between one-fifth of what we provided to less than half. And that’s where the real difference lies.

How to Choose the Right Business Insurance Policy?

Most business owners don’t know what to look for in an insurance proposal, so they only see a lower price and think it’s a good deal. However, the deal may actually be worse than what they already had. So, while a BOP policy is a convenient form of business insurance, not all are created equal. It is necessary to carefully review the limits and sublimits of protection offered by the policy.

Additionally, it often requires the insight of an experienced broker to help build all the options and limitations a business owner needs for maximum coverage. Sometimes it’s necessary to supplement BOP (Business Owners Policy) insurance with other forms of coverage where gaps may exist. Your business is the engine that drives your lifestyle, income, and net worth. Protecting it should be a priority, which doesn’t mean it needs to be complicated or confusing, but it does mean working with an expert is in your best interest.

What are the Risks, and What Does Business Insurance Cover?

What happens if a fire damages your inventory and equipment? What if a criminal breaks into your store and steals cash registers and other valuables? Or what if a customer slips on your premises and sues you? A Business Owners Policy (BOP) might be the insurance solution you need. It bundles commercial property, general liability, and business interruption insurance into one convenient package.

Purchasing these policies separately can be expensive and difficult to manage. Moreover, in many cases, you can even customize your policy by selecting additional coverages to suit the unique needs of your business. Let’s consider an example: after a fire caused by faulty wiring, a small business suffered serious damage and lost valuable equipment and inventory. Worse, the store was forced to close for repairs, leading to costly downtime. Fortunately, the business had an insurance policy that compensated them for the damaged property and the income lost due to the closure.

Advantages of Choosing a Business Owners Policy in the USA

As a business owner, you think a lot about satisfying customers, making payroll, and managing employees. The last thing you want to worry about is your insurance. So, why not choose a policy that lets you focus on what matters—growing your business?

There are various coverages for your business that you may not be familiar with or unsure whether you need. One of the biggest questions many people have is that they don’t actually know what they really need.

What’s the Difference Between General Liability Insurance and a Business Owners Policy?

Depending on the type of business, you may need both general liability insurance and a business owners policy. General liability insurance covers cases where you perform work, provide a service, or offer a product. If damage occurs to someone else’s property due to your activities or the use of your product, general liability will cover such expenses. For example, if someone sues you, claiming you didn’t perform your job properly or caused damage—this is where general liability steps in to protect you from such claims.

On the other hand, a business owners policy also includes liability, but it covers a much broader range of situations. It may include various additional coverages and endorsements specific to your industry. For example, if you own a building used for your business, a business owners policy can cover the building, liability for it, and personal property used for work.

If you own a business and use some equipment, whether you’re in lawn care, running a retail store, or engaging in another activity, you will likely need a business owners policy to cover all the tools and equipment used in your work. General liability insurance does not cover all these assets; it’s designed only to protect against claims related to poor work performance or damage caused to a third party.

A business owners policy can cover both your property and third-party liability. If you own a building used for your business and something happens to your neighbors or adjacent buildings, general liability covers these situations. However, if your business requires more extensive coverage, for example, if you have a company with 8,000 employees, you will likely need both general liability and other types of coverage.

The advantage of a business owners policy is that it combines first-party property coverage and third-party liability coverage along with other important coverages, such as theft, loss of business income, and other risks. A business owners policy covers all potential losses that may arise in the course of business operations.

Coverage for Different Types of Property

If you own a company, any building you own will be covered by a business owners policy. The policy can also cover business personal property, such as computers and equipment. If you use personal items, like a laptop, for work, the policy can also provide coverage for those items. If you, for example, run a dry cleaner and have items belonging to customers, they will also be covered under the appropriate insurance categories.

A business owners policy also includes coverage for loss of income. For instance, if property damage prevents you from running your business for several months, the lost income can be reimbursed under this policy.

Third-Party Coverage

Third-party coverage, or premium liability, ensures protection against claims arising from incidents on your premises. For example, if a customer comes into your office, slips on a wet floor, and gets injured, this coverage will provide the necessary protection against financial claims.

A business owners policy bundles all the important aspects of insurance, making it a convenient choice for small and medium-sized business owners who want to protect their business and property.

Liability and Obligations Coverage

If you’ve developed a product, and due to its standard nature, something happens to your customers, you can use product liability coverage. When it comes to contractual obligations, if you sign a contract with third parties, any obligations arising from that contract will also be covered.

Personal and advertising coverage includes protection against claims related to reputational damage. For example, if you write an article or make a statement that damages another person’s reputation, this coverage will provide protection in the event of a lawsuit.

If you have employees and one of them acts dishonestly, this coverage will protect against the consequences of those actions. For example, theft of money that occurs within your company will also be covered by this policy. If your product is counterfeited by third parties, this coverage will protect against any changes that may result from the counterfeiting.

Equipment Breakdown and Other Coverages

If your business has equipment that breaks down due to electrical or mechanical issues, the policy will provide coverage for it. This comprehensive insurance includes first-party, third-party, business income, and much more, such as protection against advertising-related injuries.

In traditional policies, you would need separate coverage for commercial property, general liability, business income, and professional liability. A business owners policy includes all these coverages in one package, making it the preferred choice for many.

What are the Requirements for a Business Owners Policy in the USA?

However, not every company is eligible for this policy. For example, if you’re a small business with fewer than 50 employees, you qualify for a business owners policy. If you have more than 50 employees, you’ll need to choose traditional commercial property or general liability coverage.

Some basic requirements include:
– If your business occupies less than 35,000 square feet of floor space, you may qualify for a business owners policy. If the space exceeds this size, you’ll need to choose other types of coverage.
– The business’s annual gross revenue must be less than $6 million.

– Office buildings must not exceed six stories or 35,000 square feet.
– For contractors, the total payroll must be less than $3 million.

These criteria are designed so that small businesses can obtain a policy that fits their risks, while larger companies opt for traditional policies with higher premiums suited to their risks.

How is the Cost of a Business Owners Policy Calculated in the USA?

The cost of a business owners policy depends on several factors, such as the location of the building, the type of construction, public fire protection, the presence of sprinkler systems, and other safety features.

For example, if your building is located in a high-crime area, the premium may be higher. The type of construction and proximity to a fire station can also affect the cost. Additionally, the building’s occupancy—meaning the type of business conducted there and who occupies it—is taken into account.