Business Owners Policy (BOP) - What Types of Business Insurance Coverage Do You Need?

Business insurance protects your company from financial damages resulting from accidents, property damage, professional errors and workers’ compensation claims. Several companies offer this coverage. Some have competitive selling points like excellent customer service or niche industry offerings.

These include commercial property (buildings, equipment and inventory) and a business interruption policy. Other specialized types of coverage are available, too.

Business Owner’s Policy (BOP)

BOPs typically include commercial property and general liability insurance, as well as business interruption coverage. Designed with smaller businesses in mind, this package policy can make it easier for companies to obtain and manage multiple kinds of insurance coverage without having to deal with individual insurers or purchasing multiple policies.

To qualify for a BOP, businesses must meet certain parameters established by each insurer. Generally, insurers will consider location, size of the business and its class as well as revenue when determining eligibility. In addition, insurance providers will usually not offer a BOP to businesses that handle their operations off-site.

There are also many kinds of insurance coverages that cannot be added to a BOP, such as workers’ compensation and commercial auto policies. However, the flexibility of a BOP can make it a great option for small business owners who want to cast a wide net of protection in case something unforeseen occurs. The bundled nature of a BOP can also make it more cost-effective and convenient than buying each type of policy separately.

General Liability

As the name suggests, general liability protects your business from common risks that come with working with customers or clients. It covers injuries to people and damage to their property, as well as advertising injury (like defamation). Many businesses are required to have general liability insurance by the contracts they sign with clients or landlords.

A business without a general liability policy could find itself paying out large sums in compensation or defense costs. This insurance can be a financial lifeline for small companies, helping them continue operations even after facing unexpected challenges.

It also shows customers that the company is responsible and professional, which may lead to more exciting opportunities down the line. For more comprehensive coverage, consider adding Errors and Omissions or Professional Liability insurance to your policy. This is a core component of most BOPs and can be purchased separately through many providers. NerdWallet rates providers based on their coverage options, customer experience, customizability and cost.

Commercial Property

Essentially, this type of business insurance covers your company’s physical assets. This is a core coverage for business owners policy (BOP).

For example, if your office gets burglarized and you lose computers or expensive furniture, this type of commercial property insurance will cover the cost of replacement. It may also help your business recoup any lost income as a result of the loss.

While some businesses that don’t have much onsite equipment might not need this type of coverage, a quick inventory should reveal whether your company has any expensive assets worth protecting. Additionally, if you store business property at your home and only have homeowners coverage, this might be a good time to add this type of policy.

Like general liability insurance, the costs of commercial property can vary depending on the location and size of your company, its construction materials, the extent to which it protects onsite equipment from severe weather events or theft, and other factors. To find a suitable policy, you should assess your risks and work with a licensed agent who understands your needs.

Business Interruption

Depending on the nature of your business, having adequate insurance protection may be critical to its success. The most basic policies cost less than a couple hundred dollars per month.

If your company is dependent on the physical location of other businesses to produce and provide its product or service, you need this coverage to help recover from lost revenue due to their closure. It also provides liability protection in the event a government order prevents your customers from accessing your premises.

This type of insurance is closely tied to commercial property and covers only those perils that the policyholder’s property insurance would cover. It covers the loss of revenue, moving expenses to a temporary location, payroll, taxes and loan payments. Most policies have a 48 to 72 hour waiting period before income coverage begins and they are typically limited in duration. Check your policy for details. These policies are designed to work well when multiple policiesholders experience a single significant loss at the same time.assurance pro