If you run your own business, you understand how quickly the cost of insurance adds up. From protecting your commercial property to defending yourself against advertising injury, you need coverage for countless forms of liability.
With the exception of workers’ compensation, the various types of business insurance aren’t required by law. However, it’s standard practice for companies to hold insurance policies that protect against physical damage, financial setbacks, and legal liabilities.
To fully cover your business, you can purchase individual insurance plans for specific liabilities or bundle your policies. One of the most popular bundles offered by insurance companies is known as a business owner’s policy (BOP).
What’s Included in a BOP?
For many businesses, taking out a BOP is more cost-effective than purchasing individual policies. Most BOPs include:
- Commercial Property Insurance– This insurance offers protection for commercial buildings or office spaces. It typically covers the facilities at the premises, machinery, office equipment, and personal or third-party property within the buildings.
- General Liability Insurance– General liability insurance helps cover medical and legal expenses in the case of a customer or client injury caused by your business. It also covers legal expenses resulting from advertising injury or damage to a customer or client’s property.
- Business Income Insurance– Business income insurance comes into play if your business suffers financial loss due to suspended business operations. Also known as business interruption insurance, it covers lost revenue when your business has to shut down due to natural calamities or disasters.
Many small business insurance policies also offer add-ons to standard BOPs, such as data breach coverage, civil authority coverage, or mold coverage. Other special coverages may include crime insurance, vehicle coverage, and flood insurance.
What a BOP Doesn’t Include
Although a BOP does cover a wide range of risks and liabilities, it isn’t a comprehensive insurance policy. Many small businesses purchase the following forms of insurance on top of their BOP:
- Workers’ Compensation– This form of insurance is legally mandatory in almost every state. Workers’ comp offers coverage for medical expenses and lost wages if an employee is injured or develops an illness while performing their work duties.
- Professional Liability Insurance– Also known as errors and omissions insurance, professional liability insurance is one of the basic types of liability insurance that protects your business from paying out of pocket for legal expenses. If you provide services or offer advice, this form of insurance protects you should an employee make a mistake or demonstrate negligence, resulting in a lawsuit.
- Commercial Auto Coverage– This policy protects your employees if they face accidents while driving their cars or company cars for business purposes.
- Other Optional Coverage– Your company may need additional insurance forms depending on your industry, specialization, and business structure. For example, you can choose directors and officers liability insurance to cover legal expenses for lawsuits related to management.
The Pros and Cons of Business Owners Policies
Not sure if a BOP is right for your business? When shopping around and comparing your options, you may want to consider the following advantages and disadvantages:
Pros:
- Affordable Diverse Coverage– A BOP provides coverage for a broad range of liabilities and typically a lower premium than purchasing individual policies separately.
- One Provider, One Plan– A BOP may be beneficial to you from a management perspective. Instead of dealing with multiple providers or reviewing numerous policies when it’s time to renew, you can bundle coverage into a single policy.
Cons:
- Lack of Flexibility– If you bundle numerous forms of insurance, you have less flexibility. You may end up paying more than you need to for certain liabilities and have less coverage than you should for others.
What’s Best For Your Business
No two businesses have the same associated risks and liabilities, and in turn, every company has unique insurance needs. While a BOP may work well for some companies, some business owners want to maintain more control by purchasing individual plans. If you’re in the market for business insurance, keep your options open, and compare rates for BOPs and separate policies.
