Protecting Your Small Business with a BOP
For small businesses with relatively simple risk management needs, a common approach is combining several forms of insurance in a business owner’s policy (BOP).
A BOP blends several forms of insurance, including property and liability as well as other coverages, in a package that is generally more cost-effective than arranging those policies individually.
In addition, a BOP can be customized to add industry-specific or other specialized forms of insurance that your company may need to ensure it is safeguarded against the financial implications of unplanned losses.
A BOP is often compared to homeowners’ insurance in that it offers a broad range of coverage under a relatively easy-to-understand policy. BOPs are especially popular among small companies, and are designed to provide insurance for businesses such as small offices, stores, and some forms of services firms. The general liability portion of a BOP policy protects your small business against financial losses and defense costs if someone claims they were hurt on your premises, by an employee in the course of their job duties, or from using one of your products.
For example, a typical liability claim may mean a patron alleging they received food poisoning in a restaurant, or someone falling on a stairway they claim was installed improperly.
Even if these allegations are baseless, defending against them can still take considerable time and require an investment in legal fees if a small business does not have adequate liability coverage.
A general liability insurance policy will provide funds for a legal defense, and may include access to attorneys with experience handling specific types of litigation.
Commercial property insurance protects a small company's physical access against accidental loss or destruction. This may involve real estate, such as an office or store, as well as the equipment your business relies on and any unsold inventory.
Property coverage can also be important for businesses that don't own their own real estate. For example, if your company rents space in a building that experiences a fire, your property coverage would reimburse you for any equipment or inventory that was damaged or destroyed.
Depending on your company's industry and any specialized risks you may have, you can add additional lines of coverage to a business owners policy.
Typical forms of insurance folded into a BOP can include:
- Business income insurance, which protects your company against lost revenue if your operations are suspended after a loss such as a fire or natural disaster.
- Equipment breakdown insurance for a loss if equipment is damaged by a power surge, operator error or mechanical malfunction.
- Personal and advertising injury coverage, which would address copyright infringement, slander and liable.
- Rented vehicle coverage, which provides liability coverage for automobiles your company leases, rents or borrows.
- Medical payments coverage to fund medical expenses if someone is injured on your business property.
Identify Your Needs
A qualified insurance agent or broker can meet with you to identify your company’s needs, and the most effective forms of coverage to help you address those needs.
BOP policies exclude coverage for pollution-related claims as well as product recalls. Certain categories of small businesses may not be eligible for BOP coverage because they have specialized risks and insurance needs.
For small businesses with relatively simple risk management concerns, a business owner’s policy may provide a straightforward and cost-effective approach to arranging the appropriate insurance coverage.