Quick take: What Is a Business Owners Policy?
- A Business Owners Policy (BOP) combines the major property and liability coverages into one insurance policy.
- They're not one size fits all. You tailor your BOP to your business.
- Optional coverage endorsements can be added. BOPs are not a substitute for personal home and auto policies.
Question My retail business is starting to turn a profit (and then some), and I know it's time to get insured. I'm just not sure what kind of coverage makes sense. I've heard that there might be a way to purchase business property and business liability coverage in a single package or policy. Does such a policy exist for business owners?
We posed this question to Bart Baker, a Farmers Insurance agent based in Malibu, California.
Answer Congratulations on your success — running a successful small business is an achievement.
And you're right, while small businesses like yours can buy insurance policies separately, many businesses appreciate the convenience offered by many insurers to combine the common property and liability coverages into a single policy, called a Business Owners Policy or BOP.
BOP is a coverage package designed to address the business losses that are most likely to occur in your particular business. With a BOP, you have the opportunity to combine various coverage types into one customized policy based on your needs. Plus, buying a BOP can sometimes be less expensive than buying individual policies.
How do I find a BOP for my business?
Not all BOPs are alike. You can choose from a variety of policies you can tailor to your specific type of business, including retail stores like yours, as well as restaurants, legal and professional offices, contractors and so on.
As an owner, you're in the best position to choose the coverage you'll need. (A BOP won't do you a lot of good unless it has been fine-tuned to meet your specific needs.) Agents like me can help business owners understand the various options so they can customize their policy.
A single BOP may include more than 20 separate components. You can add or subtract optional coverages, known as endorsements. Most include coverage for property damage, personal liability and losses caused by interruptions of business (these can make up for lost income if you're forced to close or relocate). Other endorsements that are commonly contained in BOPs include:
- Employee dishonesty
- Employee practices liability
- Errors and omissions
- Equipment breakdowns
- Food contamination for restaurants
- Liquor liability for businesses that serve alcohol
- Replacement of outdoor signage
- Cyber liability and data breach expenses
Are all businesses eligible for BOPs?
BOPs were designed with small- and medium-sized businesses in mind. Whether a business is eligible may depend on the insurer.
Before approving a BOP policy, insurers consider a number of factors of the business, including, the size of the business, the liability limits the business may want, the building it occupies, how vulnerable it may be to theft/fire, and how fiscally sound it is.
But generally, a business that has demonstrated the ability to be profitable should have several opportunities to secure coverage.
If you're wondering how much a BOP will cost, that's a hard question to answer. Here's why: Rates are based on two major factors: 1) Underwriters make an assessment of each business' risk, then 2) You, the business owner, choose your coverage level.
Does a business owner policy cover me personally?
Great question — and a very important one. No – you would need separate policies.
Think about it this way: If someone is injured in your home, or in a car accident where you're at fault, they can file a lawsuit. If they're successful, a judgment may target your assets (including your business).
So, while many business owners do a good job covering their business, they may still be at risk if they have inadequate personal home, auto and umbrella policies. Be sure to remember that and plan your coverage accordingly.
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