Introduction
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.
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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.