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What is a Business Owner Policy (BOP) and When Do You Need It?

Your company needs insurance to survive unexpected challenges that may come your way, but buying insurance can be confusing and expensive. And you won’t see any benefit unless you have a loss, accident, or claim. But without the right insurance, a theft or fire could devastate your business. A personal injury lawsuit can leave you struggling just to pay the legal fees. And yet many  business owners don’t take the time to evaluate their needs and get appropriate coverage.

Business owner’s insurance, also known as a business owner policy (BOP), combines protection for all of a business owner’s major property and liability risks in one insurance package. And the premium is usually lower than the total cost if you were to purchase the individual coverages separately. BOPs include:

  1. Property insurance for buildings and contents owned by the company. There is a standard form and a special form, which provides more comprehensive coverage.
  2. Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.
  3. Liability protection, which covers your company’s legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations, or errors in services provided.

BOPs do NOT cover professional liability, auto insurance, worker’s compensation, health insurance, or disability insurance. You’ll need separate insurance policies to cover professional services, vehicles, and your employees. To decide whether you need a business owner policy, ask yourself two questions:

  • Does your business have property—including inventory, computers, and other equipment—that you could not easily afford to replace? If your only business property is a laptop, you may not need to insure it. But if you have tens of thousands of dollars of store inventory, insurance is a must.
  • Is there a reasonable chance your business could be sued for a substantial amount of money? For example, you might be sued if someone has an accident on your premises, if you aren’t as careful as you should be, if you suffer a data breach, or if an item you make or sell is defective and injures someone.

If you answered “yes” to either of these questions, business owner’s insurance will help you minimize your risks.

However, not all businesses qualify for business owner’s policies. Insurance carriers may have requirements regarding business location, the size of the location, revenue, and class of business. Typically, businesses classes eligible for BOPs include retail stores, apartment buildings, restaurants, and office-based businesses.

The key takeaways to BOPs:

  • A business owner policy (BOP) is a package that bundles basic insurance coverages for a lower premium than if you bought the coverages separately.
  • A BOP typically protects business owners against losses due to property damage, peril, business interruption, and liability.
  • While coverages vary among insurance carriers, businesses can often opt into additional coverages, such as crime, spoilage of merchandise, forgery, fidelity, and more.
  • Insurance carriers determine if a business qualifies for a BOP based on business location, the size of the location, the class of business, and revenue.
  • A business may qualify for special considerations if it meets certain eligibility qualifications.

Contact Kamm Insurance Group today to discuss your business owner’s insurance needs!

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