A business owner's policy can offer you savings, flexibility and tailored risk protection. Here's what you need to know before you invest in a BOP.
A business owner's policy (BOP) is a type of property and casualty insurance often bought by owners of small to midsized businesses to protect against certain losses. Representing a bundling or packaging of multiple insurances normally covered by individual policies, BOP insurance generally offers you a price and premium cost advantage as compared to purchasing multiple individual insurance policies a la carte.
What a Typical BOP Covers
Keep in mind that every business is different and will likely have different insurance needs that a BOP might address. There's no "one-size-fits-all" BOP because it is intended to cover the particular risks and coverage needs of each individual business. That said, insurance companies will often have standardized BOPs tailored to certain business types, for instance, restaurants or professional services businesses. As a general matter, BOPs will cover three areas:
- Property insurance: This covers damage or loss of buildings and their contents (equipment, computers, inventory and so on) owned by the business.
- Business interruption insurance: This covers the loss of business income following a natural disaster that interrupts the running of your business and may also cover the cost of operating out of a temporary, alternative location.
- General liability insurance: This covers losses to property or physical injuries caused to third parties by the operations of your business, your products or your employees.
What a BOP Typically Does Not Cover
Workers' compensation insurance, which covers your employees for work-related injuries and lost wages, is typically not part of a BOP.
Other forms of liability, such as cybersecurity breaches or claims of sexual harassment against your business, will also likely not be covered via your BOP. However, coverage can be obtained separately for those, and other kinds of risks.
Some insurance carriers will allow you to add vehicle insurance into your BOP, so ask your insurance agent or broker if this option is available.
3 Major Benefits of a BOP
A business owner's policy may offer you a winning combination of "one-stop-shopping," affordability and customization. More specifically:
- You save money on insurance premiums by bundling your insurance needs and coverage under one comprehensive BOP policy.
- You have one point of contact for coverage and claims issues instead of having to reach out to multiple people at different insurance companies. This also reduces the administrative and paperwork burden of managing your insurance coverage.
- You typically have a menu of insurance coverage options that can be included in your BOP. In this way, you can buy exactly what you need to cover the particular risks of your business type.
To purchase the right BOP for your business and customize it as much as possible, you'll need to begin with a clear understanding of the particular risks inherent in your business. A software company, for example, likely doesn't have commercial vehicles and therefore won't need vehicle insurance; whereas a home-service business with a fleet of vans certainly will.
Assess your risks before meeting with an insurance agent, then bring your relevant financial documents and sit down with your agent or broker to discuss your business risks and insurance coverage options.
For more information on BOPs and commercial insurance, check out ADP's guidebook "Property and Casualty Coverage 101."
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