When looking for insurance, you may come across a business owners policy (BOP). These policies aren’t available for everyone, however. Instead, they are geared to specific businesses.
As a rule, business owners policies are geared for small businesses in low risk industries.
What is Considered a Small Business?
The categorization of a small business varies from industry to industry and is usually based on annual income and number of employees. For example, one industry could categorize a business with 100 employees as a small business while another industry may consider a business with 1,000 employees a small business.
If you are unsure where your business falls, be sure to ask an insurance agent about if you business qualifies for a business owners policy.
What is a Low Risk Industry?
A low risk industry is a business industry that presents less risk of filing a claim than other industries. For example, some businesses face a higher risk of being sued than others. If you work in a high risk industry, you may not qualify for a business owners policy.
Examples of low risk industries include:
- Sales (direct)
- Senior care
If your business faces a lot of liability risks day to day, you may be operating in a high risk industry. Be sure to ask your insurance agent about how you may qualify for a business owners policy.
To apply for a business owners policy, you must have the correct information. This includes your business’:
- Personal information of the business owner (name, address, etc.)
- Annual income
- Number of employees
- Desired coverage limits
What Does a Business Owners Policy Cover?
A business owners policy is designed to be flexible, allowing business owners to combine coverages into a single and affordable policy. Under a basic business owners policy, you may have:
- General Liability Insurance: General liability insurance covers claims against your business concerning third party bodily injury, property damage and personal or advertising injury. If someone is injured on your business’ property, for example, general liability insurance can provide compensation for the victim’s medical bills as well as protecting your business from a lawsuit.
- Commercial Property Insurance: Commercial property insurance covers the physical property of the business, such as the location (restaurant, offices, store, etc.) and its contents. This covers loss and damage caused by fire, wind, hail, lightning, smoke, explosions, theft, vandalism and more.
Additional coverages are available, as well, including:
- Professional Liability: Professional liability insurance covers claims against your business concerning professional negligence.
- Umbrella Liability: Umbrella liability insurance fills in holes left by your other liability coverages. If your general liability insurance reaches its limits, for example, umbrella liability insurance can help cover the remaining expenses.
- Inland Marine Insurance: Inland marine insurance covers business equipment that is damaged while in transport.
- Liquor Liability: Liquor liability insurance covers liability concerned with businesses who sell or manufacture alcohol.
- Equipment Breakdown Insurance: Equipment breakdown insurance covers expenses for repairs or replacements if your business equipment suddenly breaks down.
- Commercial Auto Insurance: Commercial auto insurance providers coverage for vehicles owned or used by a business for work purposes. These policies may include comprehensive coverage, collision coverage, liability, medical payments coverage, uninsured/underinsured motorist and more.
- Workers Compensation Insurance: Workers compensation insurance provides coverage for employees who are injured on the job. If an employee is injured at work, workers compensation insurance can cover their medical bills, wage replacement, disability benefits and more.
Every business is different and you will need a policy tailored for your business’ needs. Some businesses may face higher risks of lawsuits while others face more property damage risk, so speak with an insurance agent about adjusting a business owners policy for you.
What is the Difference Between a Business Owners Policy and Commercial Package Policy?
Both of these policies work to combine coverages for different businesses. Where business owners policies cover small businesses in low risk industries, commercial package policies are created to cover large businesses in high risk industries. Because of this, commercial package policies often offer higher limits on certain coverages.
Not all insurance providers offer both of these policies, so be sure to shop around and compare quotes when looking to insure your business.
Is a Business Owners Policy Required?
As a rule, a business owners policy is not required by state or federal law. There are certain coverages that are required that can be added to your business owners policy, however, such as workers compensation. Workers compensation insurance requirements vary state by state. Other coverages, such as professional liability and liquor liability, may be required to obtain certain professional licenses.