Large companies and businesses that are considered high risk usually don't meet the criteria for a BOP. The criteria for BOP eligibility include the size of the premises, the required limits of liability, the type of business and the extent of offsite activity. Premiums for BOP policies are based on similar factors, including business location, financial stability, building construction, and security features and fire hazards
What Does a BOP Cover?
A BOP includes property protection for an office building and its contents as well as other people's property brought into the office building. BOPs cover standard perils, including fire and theft, although certain exclusions apply, such as damage caused by floods and earthquakes.
Under a BOP, a business selects the amount of liability coverage it needs based on its assets. Liability coverage pays for the cost of defending the business in a lawsuit and pays damages if the business is sued for injury or property damage. The liability policy also pays the medical expenses of those injured, other than employees, as a result of business operations.
A BOP provides coverage for both business interruption and replacement costs if an emergency disrupts or destroys the business. Business interruption insurance not only compensates for lost income and the expenses incurred when a company is forced to vacate its premises due to disaster-related damage, but it also covers operating expenses, such as payroll, which continue even when business activities have ceased. Replacement-cost coverage pays to replace damaged or stolen property, equipment and inventory without deducting for depreciation.
In addition to the basic BOP policy, businesses may purchase add-on coverage based on the particular risks associated with the company. For example, a dry cleaner might purchase additional coverage for mechanical breakdown, which would cover the machinery the business relies on. A retailer with numerous employees might carry coverage for employee dishonesty, which covers loss of business property due to embezzlement, fraud or another criminal act.
When purchasing business insurance it's important to be sure that your company is neither over insured nor underinsured. List all company assets — including property, equipment and inventory — to help you decide the amount of insurance you need. An insurance agent or broker can help you identify risks and determine the type of coverage needed in order to fully protect the company.
What does a business owners policy cover?
Insurance companies selling business insurance offer policies that combine protection from all major property and liability risks in one package. (They also sell coverages separately.) One package purchased by small and mid-sized businesses is the business owners policy (BOP). Package policies are created for businesses that generally face the same kind and degree of risk. Larger companies might purchase a commercial package policy or customize their policies to meet the special risks they face.
BOPs include:
Property insurance for buildings and contents owned by the company -- there are two different forms, standard and special, which provides more comprehensive coverage.
Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.
Liability protection, which covers your company's legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.
BOPs do NOT cover professional liability, auto insurance, worker’s compensation or health and disability insurance. You'll need separate insurance policies to cover professional services, vehicles and your employees.
