As a small business owner, you want to have a financial safety net if your company experiences problems that could cause a significant monetary setback. For example, a fire could destroy your building and your office equipment, which could also result in lost business income. Or your company could be sued because a customer gets hurt while visiting your store.
Small business insurance companies bundle three essential coverage types that can help you recover from common problems. It’s a practical solution that can also help you save money.
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What Is a Business Owners Policy?
The best small business insurance companies combine three coverage types into one policy called a business owners policy (BOP):
- General liability insurance
- Commercial property insurance
- Business interruption insurance
Your BOP is not limited to these three coverage types. You can typically add additional coverage types to customize a policy that fits your business, such as liquor liability insurance and equipment breakdown insurance. A BOP is a popular choice for many small and medium-sized businesses, like retail stores, contractors, restaurants and wholesalers.
What Does a Business Owners Policy Cover?
Small business insurance companies generally cover these types of insurance in a business owners policy.
General Liability Insurance
General liability insurance can provide compensation if a business faces a range of claims, such as copyright infringement, reputational harm, advertising injury, bodily injury and property damage.
- Copyright infringement claims would come about if you are accused of using someone else’s copyrighted work in your business ad or other marketing materials without their permission.
- Reputational harm may occur if you say something negative in a television, print or online interview about another business owner or business that hurts their business.
- Advertising injury can happen if your business should defame another person, company or business owner.
- Bodily injury caused by your business is a common insurance claim. If someone comes to your office or store and gets injured, a general liability policy would cover their medical costs. A bodily injury claim could be something as simple as a fall by a customer.
- Property damage is another common liability insurance claim. As a business owner, you may be legally responsible if another person’s property gets damaged while visiting your business. Claims also include damage to a client’s home or other property when you are visiting them on business. Property damage coverage also can apply to damage to electronic data.
These types of claims can pop up unexpectedly, despite your best efforts. A $20,000 slip and fall claim could really hurt your business if you don’t have a general liability policy as a financial safety net. Without insurance, you’ll need to pay for the claim out of your own pocket. A big enough claim could be enough to crash your business.
In addition, clients might require that you have general liability insurance before doing business with you. To broaden your client base, you’ll want to have general liability insurance for your business.
Commercial Property Insurance
Commercial property insurance pays to repair or replace a business’s physical assets if lost, stolen or damaged by a problem covered in your policy. This can include your business building, equipment, tools, inventory, computers, business furniture, valuable papers and business records.
Commercial property insurance can pay for replacement costs if your business property is damaged in a fire, theft or other problem covered by the policy. It’s also called business property insurance.
Business Interruption Insurance
Business interruption insurance helps a business recover lost income. If you are ever unable to open up because of a problem covered by the policy—such as a fire or windstorm—this type of insurance reimburses you for lost business income.
Business interruption insurance can also cover the expenses involved in renting temporary space in order to stay open.
This is also known as business income insurance.
Additional Coverage You Can Add to Your Business Owner’s Policy Insurance
A business owners policy is a convenient insurance option for small business owners. But there are plenty of potential problems not covered by a BOP. For those, you need additional coverage types, which you can add to your BOP, including:
- Commercial auto insurance: Commercial auto insurance covers a vehicle used for business. There’s also hired and non-owned auto coverage. This type of coverage covers you if you’re renting a car you drive for work or using your personal car for work purposes.
- Commercial umbrella insurance: This covers your company beyond your business insurance policy’s liability coverage limits for problems like damage to other people’s property and accidental injuries to others. Commercial umbrella insurance can also help cover legal costs, judgments and settlements.
- Cyber liability insurance: Also called data breach insurance, cyber liability insurance covers the costs to help your business recover from cyber threats or breaches involving computer systems and data. This includes sensitive customer information like account numbers, credit card numbers, driver’s license numbers, health records and Social Security numbers.
- Directors and officers insurance: This helps cover the people who serve as your company’s directors and officers if they’re sued by customers, employees, vendors or others. Directors and officers insurance covers claims such as misrepresentation of company assets, causing a bankruptcy or financial loss, theft of intellectual property, slander, libel and copyright infringement.
- Employment practices liability insurance: Employment practices liability insurance helps pay for costs associated with employment-related claims, such as workplace harassment, slander and libel, unlawful compensation policies, discrimination and wrongful termination.
- Equipment breakdown insurance: This coverage helps pay to repair or replace equipment that is suddenly damaged or unexpectedly stops working. Equipment breakdown insurance generally covers equipment failure due to motor burnout, power surges, electrical shorts and mechanical failures.
- Errors and omissions insurance: Also called professional liability insurance, this covers claims if you make professional mistakes. Anyone who gives advice, makes recommendations or represents the needs of others may want to consider buying errors and omissions insurance.
- Home-based business insurance: Home-based business insurance helps with claims related to property damage, employee injuries and lawsuits for home-based businesses.
- Inland marine insurance: Inland marine insurance covers your business property, including materials, equipment, products and tools, while it’s temporarily stored off-site or in transit over land.
- Liquor liability insurance: Liquor liability insurance covers claims of bodily injury and property damage caused by an intoxicated person after your business sells or serves them liquor. Liquor liability insurance is also called dram shop insurance.
- Workers compensation insurance: This pays benefits such as medical bills and lost wages to employees who suffer a work-related injury or illness. Workers compensation insurance is required in most states, even if you have just one employee.
Who Needs a Business Owners Policy?
Small business owners who can’t afford to pay out of pocket for legal costs if they’re sued or to repair or replace their physical assets if lost, damaged or stolen can benefit from a business owners policy. Businesses with these characteristics are good candidates for BOP insurance:
- A business that operates in a physical location, such as a home-based business or in a store or office space.
- A business that has assets that can be stolen, such as products, cash, computers, inventory and business furniture.
- A business that is at high risk for a lawsuit.
- A business that has less than 100 employees and less than $5 million in sales.
- A business located in an area that is prone to severe weather conditions, like hurricanes.
Here are some types of small businesses that are good candidates for a BOP:
- Manufacturers
- Religious organizations
- Restaurants
- Retailers
- Technology consultants
- Wholesalers
How Much Does a Business Owners Policy Cost?
A business owners policy costs an average of $57 per month, according to Insureon.
The cost of your BOP will vary based on factors such as:
- Your industry. Industries that have higher risks, such as construction companies, typically pay more for coverage than lower-risk industries.
- Your business location. A business located in an area with higher crime and regions prone to severe weather may pay more than other businesses.
- Number of employees. If you have a large number of employees, you can expect to pay more for business insurance.
- Property value. A business’ property value plays a role in business insurance costs.
- The amount of coverage you purchase. How much coverage you buy affects your rates, since the insurance company is offering a higher level of coverage.
- The amount of the insurance deductible. The deductible is how much your insurance company reduces from your claims payment. A lower deductible typically results in higher business insurance premiums.
- Claims history. Companies that have a recent history of filing business insurance claims are considered a higher risk to file more claims in the future and typically pay more compared to a company with no recent business insurance claims.
A business owners policy is often more affordable than buying separate policies for liability, property and business interruption.
How To Decrease the Cost of BOP Insurance Rates
The average business owners policy costs $684 annually, according to Insureon. But you may find a policy under $600 a year. Insureon estimates that 42% of its small business customers pay under $600 for coverage each year.
There are ways to save on BOP insurance, including:
- Pay for the full year. Insurance companies often provide a discount if you pay for a full year’s coverage rather than monthly or quarterly.
- Choose a higher deductible. A BOP insurance’s deductible influences how much you pay for coverage. You can save by choosing a higher deductible, but remember that you will also get less from the insurance company if you file a claim since the deductible amount is deducted from a claim payment.
- Get only coverage that you need. Small business insurance companies have many types of coverage, but your business might not need many of them. BOP insurance typically has many add-ons, but only choose coverage types that your business actually needs. For example, if your business doesn’t serve alcohol, you wouldn’t need liquor liability insurance.
Is Your Small Business Eligible For a Business Owners Policy?
Insurance companies look at a number of factors when determining if a business is eligible for a BOP: type of business, size of its primary location and revenue.
Business Insurance companies also consider the financial stability of the business, building construction, security features and fire hazards.
If you pass all these factors, you will be able to get a BOP.
How to Get the Best Business Owners Policy
A business owners policy is a solid foundation for your small business, but to get the best business owners policy for your company, you’ll want to customize your BOP to meet the specific risks that are common to your industry.
- Assess your business’s risk. The risks that your small business face are unique to your industry. You can add coverage types to your BOP to customize your policy to fit your company’s specific needs. For example, if your company handles sensitive customer information like health records and Social Security numbers, you may want to add cyber liability insurance to your BOP.
- Reassess your risks annually. As your business grows, your liabilities might change. For example, if you hired more employees or expanded the types of services you offer. It’s a good idea to reassess your risks yearly and speak with your insurance agent if you need more coverage.
- Shop around. Insurers don’t price their policies the same so make sure you compare small business insurance quotes from multiple insurance companies. You can typically get free quotes online or by speaking with an independent insurance agent.
Companies That Offer Business Owners Policies
Many small business insurance companies offer business owner policies, but the coverage types available can vary by insurer. You’ll want to choose an insurer that offers the additional coverage types that fit your company’s needs.
- Acuity: The company’s Bis-Pak combines property and liability insurance and you’re able to buy additional coverage like errors & omissions insurance, employment practices liability insurance and full building replacement cost coverage.
- Allstate: Allstate combines property, liability coverage, business interruption insurance and equipment breakdown coverage. Allstate also provides customized coverage for professions like chiropractors, legal services and real estate agents.
- BiBERK from Berkshire Hathaway: The company’s BOP coverage features liability and property coverage. The insurer also offers coverage for commercial auto, errors & omissions and workers compensation.
- Chubb: Chubb’s business owners policies include liability and property coverage and allows you to buy additional coverage for privacy and data breaches, employment practices liability and equipment breakdown.
- The Hartford: The company’s BOP combines property, liability and business income insurance, also known as business interruption insurance. You can add more coverage to your BOP, including workers compensation insurance, professional liability insurance, commercial auto insurance and data breach insurance.
- Hiscox: Hiscox’s business owners policy include general liability coverage with property liability insurance. You can also add electronic data loss insurance, business interruption and hired and non-hired vehicle liability insurance.
- Liberty Mutual: Liberty Mutual’s BOP covers general liability and property damage and you can add commercial auto insurance, umbrella coverage and workers compensation.
- Nationwide: Nationwide offers BOP with property, general liability, business interruption insurance and equipment breakdown coverage.
- Next Insurance: The company offers general liability and property insurance as part of its BOP and you can add workers compensation, commercial auto and other coverage types based on your business.
- Progressive: Progressive’s BOP coverage combines general liability and property coverage. You can also add endorsements that offer additional coverage, such as cyber liability insurance.
- State Farm: State Farm has business owners policies with general liability and property coverage and lets you add business interruption insurance, hired and non-hired auto, cyber liability and contractor equipment coverage.
- Westfield Insurance: Westfield Insurance provides general liability and property insurance with the option of adding other coverage types, such as business interruption insurance. The company’s Signature Series provides industry-specific policies for hotels, medical offices, real estate and restaurants.
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Business Owners Policy FAQ
What’s the difference between a BOP and a package policy?
A business owners policy (BOP) is a bundle of small business insurance types. A typical BOP includes general liability insurance, commercial property insurance and business interruption insurance. It’s usually cheaper to buy a BOP than buying each coverage type separately. You can add more coverage types to your BOP if you need them, such as commercial auto insurance and workers compensation insurance.
A commercial package policy (CCP) is not a pre-packaged bundle like a BOP. You can choose which coverage types you would like to package with a CCP. A CCP is a more flexible option and is usually a better solution for larger businesses that have more complex risks.
What’s the difference between general liability coverage and a business owner’s policy?
General liability insurance is one type of business insurance. It covers problems such as accidental injuries and property damage to others, and other types of problems such as slander, libel and copyright infringement. It does not cover problems like damage to your business property or lost income.
A business owners policy (BOP) includes general liability insurance and bundles two more essential coverage types: commercial property insurance and business interruption insurance. These additional coverage types cover problems like damaged or stolen business property and lost income if you cannot open your business due to a problem listed on your policy (like a fire). A BOP is generally cheaper than buying all three coverage types as stand-alone policies.
Why is business owners policy insurance so important?
A business owners policy is important because it can allow business owners to focus on running their business without worrying about unforeseen events that could jeopardize their operations or financial stability.
What other types of business insurance should I consider?
While a BOP is a good start to any small business insurance plan, you’re likely to need some additional coverage types to fill in any coverage gaps. For example, you’ll need commercial auto insurance if you drive a vehicle for work.
You may be required to have other types of business insurance. For example, if you have an employee, most states require you to have workers compensation insurance. Or your client may require you to have professional liability insurance.
