As a small business owner, you do everything possible to shield your company from potential threats and liabilities to its reputation and financial well-being. You probably have a risk management strategy in place to help you and your team prevent or at least mitigate any issues that might arise. The last problems you want are service interruptions, customer lawsuits, or property damage claims.
A comprehensive insurance policy is foundational to this plan, and many insurers provide a combination of coverages as a discounted package deal. A Business Owner’s Policy offers more than a break on monthly premiums; it also makes it possible to afford the other insurance protections your company needs but doesn’t yet have.
Sounds like a great product, doesn’t it? Keep reading to learn more about these policies and what is and isn’t covered.
If you already bought a general liability policy, you may be wondering why you would need a BOP instead. Knowing the difference between the two policies is the best way to understand how they work and why you may need the additional protections that come with a BOP.
Your general coverage only deals with third-party claims, such as bodily injuries, property damage, and incidents of libel and slander. A business owner’s policy offers this same benefit and covers commercial property damage. For example, if your employee drops a tool on a customer’s newly installed tile floor, your general liability policy would cover it, as would a BOP. But, if a windstorm were to take the roof off your shop and damage your inventory, general liability wouldn’t step in and help you rebuild, but business owner’s insurance would.
So, instead of having a separate policy for third-party claim risks and another for your business property, a BOP provides everything in a neatly bundled package at a lower rate.
There’s nothing quite as costly as commercial property damage. However, the financial losses can be astronomical when your workspace has suffered a break-in, vandalism, or fire. Couple that with lost revenue while your company is temporarily unable to continue running, and you have a recipe for failure.
A business owner’s policy can be the saving grace needed to help you get back on your feet by making repairs, replacing stock, and getting back to doing what you do best. Typically, the property insurance piece of a BOP offers coverage in one of two ways:
Named Perils – Policies only cover explicitly stated events, such as fires, vandalism, storms, and explosions.
Open Peril – This BOP type takes a broader approach to describing the risks it covers, including unforeseen damage that’s not the result of your team’s actions.
You’ll also need to research what property types your insurer would cover to ensure your business qualifies:
Company buildings (owned or rented
Additions (including those under construction)Outdoor areas (rented or owned)Any business assets on or within a specified distance of your commercial property
Any third-party items your company has in its care within distance or on your premises
You may wonder if a BOP is necessary if you’re a small business owner with minimal risks. Consider the following scenarios that one of these policies would benefit and whether these are a risk your company faces:
On a construction site, one of your subcontractors backs into the side of your client’s residence, causing structural damage. You discover a water leak that has caused mould to grow behind your office’s drywall. Your business has to shut down for a few days while remediation experts come in to solve the issue. While shopping at your boutique, a customer trips on a pile of boxes jutting out into the aisleway. They severely strained their ankle and suffered cuts to their face when falling. Now they have an attorney suing your business for damages. Hurricane-strength winds caused major roof damage to your bakery. You can’t run your business till the issue gets repaired. While general liability insurance policies are often part of the list of must-haves to operate legally, business owners’ policies are not. However, given the additional protections included, small and midsize companies should seriously consider doing so for both cost savings and a broader range of benefits.
Depending on the type ofo business your company conducts, you might find that additional coverage is necessary despite the broader protections a BOP offers. It’s also possible that your insurer may be willing to bundle in additional policies to fill these gaps and create a comprehensive insurance package.
Below are other coverages you should have included in your BOP, if available:
Commercial Property Whether you own your company location or lease it, this policy is essential for protecting any structure you conduct business, store materials or inventory, and use equipment and tools.
Suppose you live in an area prone to severe weather events like tornados or hurricanes. In that case, it’s possible your business may suffer an interruption due to power outages, spoilage of goods, or structural damage. This policy covers your income losses due to these events, including the cost of temporarily relocating your operations.
This is the first type of insurance most companies buy and is always part of a business owner’s policy. However, costs related to third-party claims involving bodily injuries, property damage, and harm caused by libel and slander, can be astronomical and financially devastating. A general liability policy absorbs this cost, including legal fees to defend your case.
This is an especially important policy to carry if your company is responsible for storing, accessing, transmitting, or sharing any sensitive customer data. Every year, hackers and identity thieves get more brazen in their attempts to breach data security and steal protected information.
Many states have mandatory reporting requirements when breaches occur, and data breach coverage can help coordinate the recovery process along with associated costs and damages.
So, with your property, third-party claims, and business income protected under a business owner’s policy, you might be wondering what isn’t. The following policies aren’t usually part of a bundled policy, though you can always still ask your insurer to be sure:
You might be shocked to learn that your general liability policy won’t cover professional mistakes that cause third-party damages. That’s because things like bodily injuries or property damage to a client’s home aren’t always the result of careless mistakes. For example, as an accountant, you advise a client they can claim certain tax deductions that they actually couldn’t. This poor advice causes them to get audited, costing them thousands in legal fees. You made a professional error based on your expertise. This isn’t the same as accidentally dropping a hammer on someone’s new hardwood floors.
This coverage not only helps to absorb the damages caused to your client based on your mistake, but also the cost of defending your case against claims of negligence, unfair dealings, or misrepresentation of services. Keep in mind that not all businesses qualify for this coverage, so speak with a knowledgeable insurance agent to learn more.
If you have employees, this is usually mandatory coverage in most states. This policy is important because it protects you against employment-related negligence and injury claims and ensures your employees can get quick access to critical medical care and lost income after getting hurt on the job.
While this usually isn’t bundled into a BOP policy, you might still qualify for a discounted premium because of your other coverages.
Sure, it’s tempting to rely on personal vehicles instead of investing in a company fleet. However, remember that personal auto insurance doesn’t cover damage claims related to business travel. Therefore, you need a commercial auto policy to protect against financial losses stemming from auto accidents.
Any business insurance you purchase should provide customized solutions to minimize your company’s unique daily risks. You also want it to be cost-effective. This is why a business owner’s policy is so ideal. Everything is neatly bundled into an affordable insurance package, so you don’t have to worry about shopping for multiple quotes for several different coverage options.
If you currently have just a general liability policy, reconsider your choice and learn more about the advantages a BOP offers.