Getting It Right From the Start
Why Small Business Owners Need a BOP
If you’re a small business owner, you’ve probably heard the phrase, “Mom and Pop need a BOP.” It’s true!
A Businessowners Policy (BOP) bundles essential coverages, such as property and liability, into a simplified, affordable package designed to protect small businesses.
Whether you’re a retailer, contractor, or office-based company, a BOP is a smart choice to safeguard your operations.
What is a Businessowners Policy (BOP)?
A Businessowners Policy (BOP) is an insurance policy specifically designed for small and mid-sized businesses.
Like a homeowner’s policy for businesses, it combines property, liability, and other essential coverages into one.
This is an easier alternative to the more complex commercial package policies (CPP), which offer many optional coverages but can be overwhelming for small businesses to navigate.
Who Qualifies for a BOP?
Not every business qualifies for a BOP, but many small businesses do. Some general guidelines for eligibility include:
Fewer than 100 employees
Annual revenue of $6 million or less
Business space up to 35,000 square feet
Eligible businesses typically include retail stores, restaurants, offices, small manufacturers, and service businesses.
Core Coverages Under a BOP
Property Coverage
A BOP includes two primary types of property insurance:
- Coverage A – Buildings: This protects the physical structure of your business, including permanent fixtures, installed machinery, and materials used for repairs.
- Coverage B – Business Personal Property: Protects business-owned items such as furniture, equipment, and inventory.
A limit of insurance is assigned for each type of property coverage. For businesses renting a space, building coverage may not be necessary, but coverage for business personal property is essential.
What is Covered Under Business Property Insurance?
- Building Coverage: Extends to not just the building but also items like permanently installed equipment, fixtures, and materials on-site within 100 feet.
- Business Personal Property: Protects everything from your business equipment and inventory to leased property you are contractually required to insure. It also includes tenant improvements, such as carpets and lighting, that cannot be removed legally.
Common Exclusions
BOPs exclude certain property from coverage, such as:
- Vehicles and aircraft
- Land
- Money and securities (unless separately covered)
- Outdoor property (like fences and signs not attached to buildings)
You can often add coverage for these items through optional coverages.
Covered Causes of Loss: Open Perils
The standard BOP offers open peril coverage, meaning any risk not explicitly excluded is covered.
Alternatively, you can choose named peril coverage, which covers only specific events listed in the policy.
Additional Coverages in a BOP
Automatically included at no extra charge, these additional coverages ensure you’re protected in specific situations.
1. Debris Removal
- Debris removal is covered if a loss from a covered peril occurs, such as a fire or storm. Typically, debris removal costs are covered up to 25% of the total loss, with an additional $25,000 available if needed.
2. Business Income Coverage
- If a covered peril shuts down your business operations, this coverage will reimburse you for lost income during the time needed to restore the property. Coverage lasts for up to 12 months following the loss.
3. Extra Expense
- If you incur additional expenses (like relocating to a temporary office) after a loss, this coverage helps pay for those costs. Like business income coverage, it’s effective for up to 12 months after the incident.
Optional Coverages You Can Add to a BOP
1. Outdoor Signs Coverage
- This optional coverage protects outdoor signs from direct physical loss or damage. The limit for this coverage will be specified in your policy declarations.
2. Money and Securities
- Coverage applies to loss of money and securities from theft, disappearance, or destruction. It covers money at a bank, in transit, or on your premises.
3. Employee Dishonesty
- Covers losses from theft or fraudulent acts committed by employees. This coverage ensures you’re protected from internal risks, and it applies up to the policy limit listed in your declarations.
Liability and Medical Expenses Coverage
Liability Coverage
Business liability covers your legal responsibility for bodily injury, property damage, and personal and advertising injury.
Business liability covers your legal responsibility for bodily injury, property damage, and personal and advertising injury.
It protects against claims arising from:
- Injury: Such as a customer slipping on a wet floor in your store.
- Property Damage: Like accidentally damaging a client’s property.
- Personal and Advertising Injury: Defamation, slander, or copyright infringement related to your business activities.
This liability coverage applies in the U.S., Canada, and even abroad in specific situations, like international business trips.
Medical Expense Coverage
This coverage provides payment for medical expenses, regardless of fault, when someone is injured on your premises or as a result of your business activities. It includes first aid, medical services, and funeral services, with certain limitations for employees or residents.
Supplementary Payments
Your BOP also includes supplementary payments, which cover:
- Legal defense costs (in addition to your policy limit)
- Bail bonds up to $250
- Reasonable expenses incurred in defense of a claim, including lost earnings up to $250/day
Exclusions Under Liability Coverage
Liability exclusions in a BOP include:
- Intentional injuries
- Contractual liabilities
- Liability from pollution or mobile equipment use
- Workers’ compensation obligations
- Claims related to the sale or use of alcohol (for businesses involved in those activities)
Optional Liability Enhancements
Hired Auto and Non-Owned Auto Liability
This optional coverage protects your business from liability when employees use their personal vehicles for business purposes. For example, if your employee gets into an accident while delivering products, your business could be sued. This endorsement offers protection in such scenarios.
Professional Liability
If your business provides professional services, this coverage can be added to protect against claims of negligence, errors, or omissions made while providing services.
Who is Covered by a BOP?
Who is insured under a BOP depends on the business structure. Here’s a quick breakdown:
- Individuals: Named insured and their spouse
- Partnerships: Named insured, partners, and their spouses
- LLCs: Named insured, members, and managers
- Corporations: Named insured, executive officers, and directors
Employees are also covered while acting within the scope of their employment.
Endorsements to Customize Your BOP
BOPs can be further customized with endorsements to fit your unique needs.
- Utility Services Endorsement: Covers loss from interrupted water, power, or communication services.
- Protective Safeguards Endorsement: Requires specific safety devices (like sprinklers or burglar alarms) and reduces your premium. Failure to maintain these safeguards could result in coverage being denied.
FAQs About Small Business Insurance
Q: What businesses benefit from a BOP?
A: BOPs are ideal for small and medium-sized businesses like retailers, service providers, restaurants, and offices with fewer than 100 employees and under $6 million in revenue.
Q: Can I add commercial auto coverage to a BOP?
A: While BOPs do not include commercial auto insurance, you can add Hired Auto and Non-Owned Auto Liability to protect your business when employees use personal vehicles for work.
Q: Does a BOP cover flood or earthquake damage?
A: No, flood and earthquake coverage is excluded from a standard BOP. These can be purchased as separate policies.
Q: Is employee dishonesty covered?
A: Yes, you can add employee dishonesty coverage to protect against losses from theft or fraudulent activities by employees.
Q: How much does a BOP cost?
A: Costs vary depending on business size, industry, and coverage needs. Typically, a BOP is an affordable solution for small business insurance.
We are Here for You!
For small businesses in Miles City, Montana, a Businessowners Policy offers comprehensive coverage tailored to your unique needs.
From protecting your property and equipment to covering liability risks and business income loss, a BOP is the smart, cost-effective choice for businesses seeking simplicity and reliability in their insurance.
Contact Armor Insurance Agency today to discuss how we can protect your business with a customized BOP policy.