Business Owners Policy

What You Should Know About: Business Insurance

Your business: you built it; make sure it is protected by the right insurance coverage

What you should know:

• Before buying insurance for your business, it’s important to assess your risks to determine what kind and how much coverage you need.
• Make sure the agent, broker or company you choose is experienced in your line of business and is reputable and reliable. Also, be sure to shop around for the best rates.
• As your business grows, so does your exposure to risk of loss. Conduct an annual checkup on your business insurance to make sure you continue to have the coverage you need.

Insurance companies that underwrite and sell commercial insurance coverage usually offer policies that combine protection from major property and liability risks in one package. A common type of package purchased by small and mid-sized businesses is the Business Owner’s Policy (BOP). Larger companies usually purchase Commercial Package Policies (CPP) or customize their policies to protect against special risks.

The Business Owner’s Policy (BOP) is only available for certain types of smaller businesses and only a few types of risk, including:

1. Property Insurance – This covers buildings and contents owned by the company. There are two different forms, Standard and Special. Special Form policies provide more coverage and tends to have marginally higher premiums.
2. Business Interruption Insurance – Covers loss of revenue resulting from an insured loss that disrupts business operations. It also can provide extra expenses so the business can operate from a temporary location while repairs are made to your place of business.
3. Liability Protection – Covers your company’s legal responsibility for harm it may cause to other people or businesses resulting from the actions or inactions of the owner or employees. Businesses that sell or manufacture products also carry additional coverage that compensates individuals or businesses that are harmed by the product sold or manufactured by the business.
4. Business Auto Coverage – This is not included in a standard BOP but can be added as an optional coverage, or as a stand-alone commercial auto policy.

BOPs do not cover Professional Liability, Workers Compensation or Health and Disability Insurance. These risks require special coverage that is available in a stand-alone policy from an agent or insurance company representative. You will also need additional coverage for flood, earthquake and earth movement (landslides) if you live in an area prone to these disasters.

A Commercial Package Policy (CPP) also allows you to bundle various types of coverage within a single policy and is available for a wide range of businesses. It also can be customized to the specific needs of your business. Here are the basic coverages of a CPP:

• Property Insurance – Covers damage to buildings, equipment, inventory and more.
• General Liability Insurance – Covers costs if someone is injured at your business or from using your product or service.
• Business Income Insurance – Also known as Business Interruption Insurance, this replaces lost revenues and covers extra expenses if your business must shut down or relocate due to covered losses, such as fire or wind damage.
• Business Vehicle (or Fleet) Insurance – Covers vehicles owned and operated by your business.
• Business Crime Insurance – Covers losses from burglary, computer fraud, employee dishonesty and other business crimes.
• Commercial Umbrella Liability – Increases and broadens liability coverage.
• Electronic Data Processing (EDP) Coverage – Covers costs associated with the loss or damage of computers, computer programs and data because of mechanical breakdown, electrical injury and changes in temperature and humidity.
• Equipment Breakdown – Also known as boiler and machinery insurance and covers losses from the malfunction of heating and cooling systems, telephone systems and other equipment.
• Employment Practices Liability – Covers costs tied to disputes with employees over termination, discrimination, sexual harassment and other issues.
• Inland Marine – Covers the transport of goods over water and land.
• Pollution Liability – Covers costs related to pollution and includes clean up and personal injury.

Typically, CPP coverage does not include Directors and Officers (D&O) liability, health and disability, life insurance and workers compensation. These coverages can be purchased separately, however. You will also need additional coverage for flood, earthquake and earth movement (landslides) if you live in an area prone to these disasters.

*Some information provided by Insurance Information Institute