What Does a Business Owners Policy (BOP) Cover?
The business owner’s policy is designed to take into account all the major property and liability risks under one package. Such packaged policies are designed for firms that face pretty much similar risks. The BOP costs far much less than the general liability and property insurance when bought separately. When all these covers are combined under BOP, the insurance firms usually sell it at between 15 and 20% lesser cost. Several factors are used to set the premiums for a BOP policy. These include risk factors, business location, the size of the firm and number of employees. Premiums can range anywhere from $500 to $15,000.
1. Property Insurance
This insurance cover is known to include the building, and real estate or structures under which the business works. It covers not only the building but also the contents owned by the company and housed within. There are two different forms of property insurance under the BOP. There is the standard property insurance cover and the special cover. The special cover provides comprehensive coverage. The BOP covers most property on or near your business premises that are used by the firm. This includes items such things as machinery, computers, raw materials or inventory.
2. Business Interruption Insurance
This aspect of the BOP cover takes care of the loss of income resulting from fire or any other disaster that disrupts the course of doing business. Not only does it cover the loss of income due to disruption of operations of the business it can also cover the new operations from a temporary location. It’s structured to provide up to 12 months’ income for companies when it is forced to shut down operations because of a covered event on the property. This cover has exceptions on the items not included under the business interruption.
3. Liability Protection
This aspect of the BOP cover takes care of your firm’s legal responsibility for the harm it may cause to others. The harm constitutes an incident that you or your employees may do or fail to do in the course of your business operations. The commission or omission may, in turn, result in bodily injury or property damage. The primary forms of hazards, in this case, include faulty installations, defective products, and errors in service. This BOP liability is geared towards indemnifying third parties that suffered injury due to the occurrence of the insured loss.
4. Provides Protection Against False Advertising
False advertising, libel, and slander have become increasingly common especially with the advent of user-generated content. This cover will save your business in case someone files a successful claim against your firm for slander or libel. It’s also a good cover to have when someone files a baseless claim. The most prevalent suit in this category tends to be suits against false advertising. This coverage is mostly needed by those who work in reputational careers and industries such as finance, public relations, media and sensitive industries like the health sector.
5. Leasehold Interest
If you currently have a favorable lease on the property, this could be a critical coverage under your BOP policy. This policy covers the loss suffered as a tenant due to termination of a favorable lease due to damage to the leased premises by a covered cause. Most property leases allow the landlord to terminate the lease in the event of a fire or other damage to the property that will take longer than 90 consecutive days to repair. The principal coverage is computed as the net leasehold interest. This cover is particularly critical if your lease allows you to pay lower rental income than the going market rate.
6. Data Breach Coverage
Any firm that handles confidential client data and information is always at risk of data breaches. This coverage under BOP will cover the cost of notifying impacted person, engage the credit card firms, conduct public relations, and any other associated costs. It also offers cover for defense, settlement and judgment costs in case one of your customers institutes a suit. The policy coverage is provided even if private data is stored internationally or offsite. The policy can also replace lost income and the extra expenses incurred if you have to close the business due to the data breach temporarily.
7. Endorsements To BOP Coverage
SMEs can add endorsements to their current BOP policies. This provides additional coverages that may be related but not included in the BOP. The endorsements that benefit your operations depend on your industry. For instance, a firm that is based near a water body can add flood coverage a type that is generally excluded from the basic Property Insurance policies. When looking around for a BOP policy from an agent, it’s critical to ask them if any endorsements make sense for your business.
8. Rented Vehicle Coverage
This coverage under BOP can help you to rent or lease a company car and maintain financial protection. This comes n handy in case of theft or collision. For it to extend to a rental car, it must be a collision and comprehensive coverage policy. A collision damage waiver (CDW), as well as a loss damage waiver (LDW), can indemnify you for any damage or theft of the car. Supplemental liability protection under the BOP will pay for damage you do to other vehicles or accidental damage to property. The policy could also cover injuries and bodily harm to you as well as items stolen in the car.
The Business owner’s policy is the most financially prudent cover any small or medium sized business owner should seek. However, there are items that the BOP won’t cover for you. These include auto insurance, professional liability, health and disability insurance as well as worker’s compensation. Therefore you’ll need a separate cover for your employees, professional services and for your vehicles. Despite these omissions, the business owner’s policy is still a critical package for any firm that wants to cover itself against hazards.