Rather than purchasing separate property and liability coverage, many small businesses opt to lump them together in what's known as a Business Owner's Package policy (or BOP). For eligible small and medium-sized businesses, a BOP is a comprehensive package that can be a potential bargain source of insurance.
Since you can't predict when you might be hit with a natural disaster or a lawsuit, purchasing a BOP is a good way to get basic coverage when you're starting your business. No matter how remote these risks may seem, just one hurricane or one personal-injury claim can make all the difference.
What is a BOP?
Like general property insurance coverage, the property portion of the BOP offers named perils or all risk coverage. Some policies will even include other types of property-related insurance such as extra expense policies as part of the package.
The liability portion of a BOP is structured quite similarly to a stand-alone Commercial General Liability (CGL) policy. The primary difference: A BOP gives you much less flexibility in determining your coverage limits for particular claims. It's important, however, to note that a BOP does not include professional liability insurance, which protects you from losses or expenses resulting from claims of errors or omissions or negligence in your business.
Business interruption insurance is generally included in a BOP. Business interruption insurance covers lost income and expenses incurred when a company suffers disaster-related damage. Operating expenses that continue to roll in even if business is suspended, such as payroll, are also covered.
BOPs typically provide reimbursement for up to a year of lost revenue resulting from an insured property loss.
Who needs to purchase a BOP?
Almost every small business should look into a business owner's policy for basic coverage. But to qualify for a BOP, you have to meet certain criteria: The company should have 100 or fewer employees, and revenues should not be more than $1 million. For companies that exceed these two limits, purchasing insurance a la carte is probably the way to go, and Commercial General Liability insurance is a good place to start.
While it is one of the most common types of insurance for small businesses, some companies may find the coverage limits of BOPs to be too low, or may not like the lack of flexibility on options like coinsurance.
Keep in mind, however, that what the policy lacks in flexibility it usually makes up for in lower premiums.
What about add-ons?
And although comprehensive, companies with a BOP will still need to purchase other coverage such as automobile insurance (also called fleet insurance) and workers compensation separately.
For companies with particular risks specific to that industry, an insurance broker should be able to suggest types of additional coverage you may need to fully protect the company. For instance, a dry cleaner would want to purchase additional coverage in case of a mechanical breakdown since his or her business is so dependent on the performance of the machinery.
Small businesses should always look into getting more liability insurance than what is included in a BOP since the amount and kind of liability facing each business is typically specific to their industry. So a basic BOP usually won't be enough.