A business owner’s policy (BOP) has been compared to a homeowner’s policy for business. BOPs were first developed in the 1970s and have become a very popular form of insurance for small to medium sized businesses. BOPs combine some of the basic coverages needed by a typical small business into a standard package at a premium that is generally less than would be required to purchase these coverages separately. Business owners also like the simplified nature of the package as opposed to buying a collection of small policies. The efficiency also appeals to insurance companies and allows them to offer a lower premium for the package.
A similar packaged product is also available for farmers.
Most of the coverages that are needed by small and medium sized businesses, with the exception of auto and worker’s compensation, are generally included. This not only simplifies the process of buying the basic insurance coverages, but often gives a lower premium for businesses that qualify for a BOP. Business owner’s policies basically consist of property coverage, liability coverage and some additional types of coverage that most businesses require. Optional coverages can also be added to meet specific needs of the business.
Typically a BOP policy includes:
1. Property insurance (covering buildings, equipment and inventory).
2. Business interruption insurance (covering losses that cause you to shut operations or reduce production for a time). Business interruption insurance can provide money to offset lost profits or to pay continuing expenses (typically for up to a year for insured losses).
3. Casualty or liability protection (covering harm done by the employees or products to other people or their property).
4. Crime insurance (covering loss of money or securities resulting from burglaries or robberies or destruction) as well as losses from employee theft or embezzlement.
5. Liability insurance covering lawsuits arising from accidents (as when someone trips and falls on your business’s property) or when you sell a product that damages the customer’s property or you are accused of offenses such as slander, copyright or invasion of privacy.
6.Vehicle coverage for rented or borrowed vehicles.
A number of other coverages such as flood insurance or earthquake insurance or owned vehicle coverage and specialized liabilities are generally not included in POBs. Some of these may be available separately for extra premiums.
One of the distinguishing features of BOPs is that most automatically include business income and extra expense coverage (subject to some limitations).