Business Owners Policy & its Coverage
Updated: Apr 24, 2022
What is Business Owners Policy?
This coverage is very important to protect financial loss against Property damage, personal property, Equipment, Tools, inventory, Furniture, Landscaping etc and it is something that you may need if you own your building, lease or work from home. Business Owners policy combines both business property and business liability insurance into one policy.
Earthquakes and Floods are not covered by the standard insurance policy. It may be added as an additional peril to the existing policy or may be bought separately. It can protect from the most common losses caused or happened to the business owners such as Property damage, Vandalism, Theft, Business income interruption, Liability etc.
Having a Commercial property insurance coverage may protect your Property, assets and business from a heavy unrecoverable loss to a minimal interruption of running your company. Especially if it is a small business company or recently started company, the recovery of loss and business interruption may hinder the growth of the company in a very large extent if there is no Business owners Insurance Policy(BOP) coverage.
The main difference between the Commercial policy and the Business owners policy is the option for the coverage to be added and removed. A small business may need a Business owners policy and a large riskier business may need a commercial insurance policy. The coverage can be bundled according to the individual needs.
What type of businesses can benefit from BOP?
Business owners policy is suitable for small business scenarios such as the company has less than 100 employees, the annual sales of the company is less than $5 million dollars, has equipment and inventory to be protected, is located very close by to your home, low-risk industry, smaller commercial space etc. These criteria and the ranges may differ from policy to policy.
How much does it cost?
The cost of the policy is determined by various factors depending on the Policy Holder and the Policy Provider, Value of the business assets and the building, coverage limit, liability, deductibles etc. Some of them are listed below.
Location - If the place of your business is located in an area where the impact of natural disasters like storms, wildfires, sinkholes are higher, then the insurance premium is usually higher. If your business is located in a high crime area, then the insurance premium may be higher as theft and vandalism are usually covered in the policy. If your business is located near a fire station or a fire hydrant, you may receive a reduced premium.
Occupancy - The more people that work in your office or move through your office, the premiums are usually higher. The businesses that are open longer may also have high premiums.
Construction - The insurance premiums of brick, stone or wood constructions vary accordingly. The building with proper code requirements and upgrade made in electrical wiring, plumbing etc may have a lower premium.
Building and Equipment condition - The older the building and equipment are, higher the chances for an insurance claim. This may be reduced by upgrading or renovating the building and equipment to the needed standards.
Covered Perils - The cost of the policy may differ according to the perils covered by the policy. An all risk property insurance coverage has a wide range of coverage except for the certain exclusions and thus the insurance premium may be higher.
Actual Cash Value or Replacement Value - Actual cash value of the property is the value obtained after the depreciation of the property. Replacement value is the cost needed to replace the property in a same manner. Thus, Replacement Value may have a higher premium than Actual cash value.
Type of Business or Industry - The insurance premium also depends on the type of business or industry run as the risk factor varies. For example, the business that sells Jewellery is in high risk of theft than a business that sells second hand items. The restaurants have a high risk of fire than the clothes store.
What does it cover?
A standard business owners policy cover liability coverage, Commercial Property coverage, Business interruption coverage etc and the coverage options may vary according to the policy.
General Liability Insurance
This coverage safeguards you and your business if someone makes a claim against you or your business. It may cover the Court costs, Legal fees, Defense fees, Medical expenses etc. If you are sued for causing a property damage, bodily injury etc either directly or by the use of the products that you manufactured or sold, this may help cover the costs. It may also be caused due to the faulty services provided. It can also help protect from the legal claims such as libel, slander, Copyright Infringement etc.
Commercial Property Insurance
Commercial property insurance helps protect the building, business owned items, equipment, inventory, Fixtures etc. The standard coverage may only have limited perils under the coverage. It is important to know what perils are included in your policy especially if the business is located in the disaster prone area.
Natural hazards like floods. earthquakes are not included in the standard policy. It can be added on as a peril or can be bought as a separate policy. In case of damage to the building and business items, the damage is compensated by Actual cash value or Replacement cost depending on the policy.
Business income coverage
In the event of a damage by the perils, theft, Vandalism or the business becomes inoperable or a temporary close, this insurance coverage may help cover the Business expenses, Employee salary etc. If the business can't generate revenue for a certain period of time, this may help you to continue your business with less obligations.
These coverage can be added on to the standard insurance policy as an endorsement to increase the coverage and better protect your business. These additions depends on the specific business type and their needs which vary depending on a number of factors. Some of these coverage may not be available under your policy or you may not be eligible for receiving the coverage.
Errors and Omissions Coverage
This coverage may help protect you and your business from claims of negligent errors in products or services provided. This is also called as Professional Liability Insurance.
Data Breach Insurance Coverage
It is also called as the cyber liability insurance. This helps the businesses recover the data breach occurred in the event such as leakage of credit card information of the customers.
Equipment Breakdown Coverage
This insurance may help cover the cost of breakdown of equipment such as machinery, computers etc under certain conditions outlined in the policy.
Commercial Auto insurance
This insurance may help protect the commercial vehicles used for the business purposes.
Employment Process Liability
This insurance may help cover the costs of liability arising from the mistakes in the act of employment and its processes.
Liquor Liability Insurance
This insurance may help protect the alcohol serving restaurants and bars and cover the cost of damage done to the property or bodily injury done to others by an intoxicated person.
Employee Dishonesty Insurance
This insurance may help protect your business from the dishonest practices of an employee like stealing money or any other fraud.
Worker's Compensation Insurance
This insurance may help cover the costs and medical expenses of the work related injuries caused to the employees. It may also cover the lost wages.
The events and items covered by your insurance policy differs based on your policy and insurance provider. The conditions and limitations of the coverage vary upon your specific policy. Inform insurance company ahead of time if you have any expensive structures in your property. This will act as a documentation for coverage in case any mishap happens.
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