Is a BOP Insurance Policy Right for Your Small Business?

There are more than 33 million small businesses in the U.S., according to the U.S. Small Business Administration. In fact, 99.9% of all U.S. businesses are small businesses. It’s no surprise, then, that a special insurance package exists just for them: the business owners policy (BOP). If you own a small business, it’s important to determine whether a BOP insurance policy is right for you.

What Is a BOP Insurance Policy?

BOP insurance is designed for small and midsize businesses. It combines several common coverage types that most small business owners need into a single package.

What Does a Business Owners Policy Cover?

A BOP commonly includes several types of coverage. According to the Insurance Information Institute (III), a BOP:

• Typically includes property insurance coverage for buildings and contents owned by the company, business interruption coverage, and liability protection for bodily injury or property damage to others.
• Does NOT include auto insurance, professional liability insurance, workers’ compensation, or health and disability insurance.

Note that the above is not a complete list of excluded coverages. Furthermore, since multiple insurance companies offer BOPs, packages can vary – some insurance companies allow business owners to include additional coverage in their BOPs.

A Convenient, Cost-Effective Option for Small Businesses

A BOP is a convenient way for business owners to secure insurance coverage. It can also be an affordable option.

Investopedia says a BOP often costs less than the total of the individual coverages. In other words, buying a BOP with property, business interruption, and liability coverage can cost less than purchasing each of the policy types separately. This can be a simple way for business owners to reduce their overhead costs.

The Downsides of a BOP

A BOP may not be appropriate for every business.

If the BOP doesn’t meet your needs due to its limits or exclusions, you may need to look elsewhere for coverage. For example, III notes that large businesses may want to customize their policies to cover their specialized risks. This can be easier with separate policies. Furthermore, not all businesses qualify for BOP insurance coverage. Investopedia says many insurance companies only cover companies that handle all business on their premises and don’t perform work at other locations. BOPs often cover retail stores, apartment buildings, small restaurants, and office-based businesses.

Is a BOP Right for Your Business?

If you own a small business, you should consider whether a BOP could protect your business.

• Do you need property, business interruption, and general liability coverage? These are common coverage types many small businesses need – which is why they’re packaged together in a BOP. For example, if your business has a physical location, you probably need property insurance. You may also need property insurance to cover equipment, inventory, and supplies. Business interruption insurance can help your business survive if a wildfire or other covered disaster forces you to suspend operations temporarily, whereas general liability insurance protects your business against common lawsuits involving bodily injury or property damage.
• Are you a small or midsize business? According to III, if your business has fewer than 100 employees or your revenue is around $5 million or less, your business may be a good candidate for a BOP.
• Do you need more specialized coverage? Although a BOP is a great option for many small businesses, it’s not appropriate in every situation. If you need more specialized coverage, you may be better off buying separate policies.

Additional Considerations for Business Owners

If you decide to purchase a BOP, you need to understand it does not cover everything. For example, BOPs don’t typically provide commercial auto insurance. If you or one of your employees is involved in a crash, your company could be sued and you won’t have coverage under your BOP.

In addition to a BOP, your business may need commercial auto insurance and professional liability insurance. If your BOP excludes cyber losses, you should consider purchasing separate cyber coverage. If you have employees, you may need additional coverage types, including workers’ compensation insurance and employment practices liability insurance.

Here’s the good news: You don’t have to figure this all out on your own. Heffernan Insurance Brokers can work with you to review your insurance needs and put together a tailor-made insurance package. Learn more.