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Business Owner’s Policy

Business Owner’s Policy

A Business Owner’s Policy (BOP) is a special type of commercial insurance. It is designed for small and medium-sized businesses.  It combines general liability insurance and property insurance into a single policy.  A Business Owner’s policy typically offers a reduced premium, often making it a more cost-effective option than separately purchased policies. Specific coverage included in a business owner’s policy varies among insurance providers.   Most policies require that businesses meet eligibility criteria to qualify.

Just as you would protect your home and its contents, you should also cover your business assets against a loss.  Ensure that the coverage is adequate.  The most common is to insure for replacement value.  That way, if you do suffer a loss, you will not be out of pocket to get back to business as soon as possible.  You will have to adjust your coverage periodically as you acquire or dispose of property.  You should also be careful to update the replacement values as time goes by.

Insurance companies evaluate potential customers by looking at the risks inherent in their businesses.  Fire risk is one of the main factors in determining the cost of property insurance.  Building or leasing a fire-resistant building should reduce premiums significantly.  You should also make it a point to keep your premises neat and tidy.  A location with piles of boxes and debris is a much higher fire risk.

Ways to reduce risks

1.  Check smoke detectors on a semi-annual basis and maintain written records.

2.  Maintain all fire safety equipment.

3.  Maintain emergency lighting and illuminated exit signs in proper working order.

4.  Develop a daily inspection routine of the premises, taking immediate steps to correct any hazards.

5.  Avoid overloading electrical outlets.

6.  If you live in a flood-prone zone area, determine whether your property is above or below the flood-stage water level.

7.  Know the history of flooding in your region, the warning signs of flooding, and the items you need to be prepared.

8.  Keep disaster supplies on hand.

Standard Coverage

A typical business owner’s policy includes property and liability insurance.  The property insurance portion of a Business Owner’s policy is available most often as named-peril coverage. This provides compensation only for damage caused by events specifically listed in the policy (typically fire, explosion, wind damage, vandalism, smoke damage etc)

Some BOPs offer open-peril or “all-risk” coverage;  this option is available from the “special” BOP form rather than the “standard”.

Types of property covered by a Business Owner’s policy usually include:

Buildings:  Owned or rented business premises, additions and additions in progress, outside fixtures.

Personal business property:  Any items owned by the business or business owner or owned by a third party but kept temporarily in the care, custody or control of the business or business owner.  To be covered by a Business Owner’s policy, business property must be stored or kept in specified proximity of business premises (e. g. within 100 feet of the premises).

In addition, many business owner’s policies include business interruption insurance as part of their property coverage.  Business interruption insurance provides up to 12 month’s income for covered businesses when they are forced to shut down operations because of a covered property event.

The liability portion of a business owner’s policy offers coverage for third parties who suffer bodily injury, property damages, advertising injury or personal injury on a covered business premises or caused by the business’s owner or employees.  This coverage typically takes the form of compensation for legal fees related to third-party lawsuits over such incidents (including lawyer’s fees, settlements and court costs).  In addition, BOP liability coverage may include compensation for medical expenses that result from an injury to a third party on a covered business’s premises for up to one year after the incident occurs.  In addition to standard coverages, most insurance providers offer optional additions or endorsements on business owner’s policies that business owners can use to tailor a policy to their specific needs.

Exclusions and Optional Coverages

Business owner’s policies do not include the following types of insurance:

Liquor Liability insurance for businesses that sell or manufacture alcohol

Professional liability insurance

Worker’s Compensation

Health Insurance

Disability Insurance

Auto Insurance

Often commercial fleet insurance is not covered in a Business Owners Policy, and needs a separate policy.  Another exclusion often seen in a business owners’s policy is equipment breakdown or mechanical equipment breakdown insurance, which also may be known as boiler and machinery insurance.  This type of coverage will cover repair or replacement of equipment and some revenue loss in the event of a loss as it impacts your business and its day to day operations.  Furthermore, take a look at debris removal.  You may have flood insurance, but not debris removal, or only a small coverage limit.  Imagine the cost of removing a total loss before having to rebuild.

Many insurance companies offer businesses the option to customise a BOP based on specific coverage needs.  Optional property endorsements that can be added to a BOP include coverage for certain crimes, spoilage of merchandise, computer equipment, mechanical breakdown, forgery and fidelity bond, but the coverage limits for these inclusions are typically low.

Eligibility

Business owner’s policies are not available to every business.  Eligibility requirements vary among insurance providers, but typically include limitations to:

Class of business (eligible classes include small restaurants, retail stores, apartments, office-or service based businesses, wholesale distributors and contractors).

Location of the majority of business operations (most BOPs require businesses to complete primarily on-premise business).

Size (area) of a business’s primary location.

Revenue :  Less than $5 million sales per annum.

Employees:  Less than 100 employees in the business.