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What is a Business Owners Policy (BOP)?

A Business Owners Policy (BOP) is an insurance policy that bundles three common coverages a business owner needs. Having a BOP policy makes it easier for you as a business owner to manage your insurance. This type of policy is also generally less expensive than buying these coverages separately. Here are the main reasons to consider buying this type of policy for your business.

General Liability Coverage

Businesses have general liability coverage to protect themselves in the event they damage a customer or their property. The damage would need to occur in the normal course of doing business. The types of things general liability covers include defective products, a customer slipping and falling on the business premises, damage to a property rented to your business and advertising injury.

A general liability policy doesn’t cover professional liability. You may be sued for being negligent when providing a professional service, for example. Professional liability includes providing professional advice to a client while general liability coverage would not.

Business Property

Businesses that own property should have business property insurance. A BOP will usually offer coverage on a named-peril basis. The types of perils they insure against include things like fire, smoke damage, wind, vandalism, and explosion. There is a Special BOP that has “all-risk” coverage with exclusions. This type of BOP will cover any damage to property, not specifically excluded. 

A BOP also ensures property owned by others that is under the care, custody, and control of your business. A garage owner, for instance, would have coverage extended to a customer’s vehicle on his premises that is damaged in a fire. Storage facilities would have coverage for a customer’s property stored on their property.

Business Interruption

Business interruption insurance covers your loss of income should your business be shut down by a covered claim. If you had a fire in your business, for example, the business interruption would cover your loss of income while the fire damage is being restored. It can also cover the extra expenses required if you were to operate your business out of a temporary location temporarily.

Adding Additional Coverages

You can include additional coverages on a BOP to meet your individual business’ needs. You may buy coverage for electronic data loss or dishonest acts performed by an employee. Insurance companies also offer coverage for terrorist acts, which would otherwise be excluded from your BOP.

Final Takeaway

A BOP is a convenient way to provide the insurance coverage your business needs all in one policy. A BOP is easier to manage than three separate policies. If a loss occurs, it’s easier to coordinate coverage if all three policies are insured in the same package. As mentioned, a BOP is usually less expensive than buying these important coverages separately. The types of businesses BOPs are ideal for include retail stores, restaurants, and offices.

Updated on April 22, 2020

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