Why Do I Need a Business Owners Policy?
Every business needs insurance, it’s just a matter of identifying your business risks then assuring that you insure against them! Easy as pie, isn’t it? Well, no, it isn’t always that easy. That is why the business owners policy was invented, to simplify the insurance process. Insurance companies have already done the work of identifying risks common to small businesses and put together packaged policies that cover those risks. There are multiple forms and options on BOPs, customizing a package to fit your business needs is simple when you have an experienced agent.
In general, small businesses need property and liability insurance. You need to protect company buildings and their contents as well as protect your company in the event you, an employee or your business property somehow causes harm to others. Most industries also need business interruption insurance, which covers your loss of income after a disruption in business and may also include extra expenses for a temporary location. By protecting your property and limiting risk due to liability claims, BOP insurance can help save your small business money.
What does a Business Owners Policy Cost?
Business owners policies vary in cost as much as they vary from business to business. Pricing is typically based on the following factors:
- Years in business.
- Geographical location.
- Claim history.
- Number of employees.
- Total annual revenue.
- Replacement cost of building, contents and equipment.
Optional coverages, depending on the insurance carrier, are priced at either a flat rate premium or a percentage of the policy premium.
What are Common Business Owners Policy Claims?
The first step to take when you think you have a claim is to call your agent. Your agent will help you organize your information and guide you through calling the insurance carrier who will process your claim. The following are the top five property and liability claims for small businesses as reported by The Hartford1 (2015):
- Burglary and theft
- 20% of claims.
- Average cost to business owner: $8,000.
- Water and freezing damage
- 15% of claims.
- Average cost to business owner: $17,000.
- Wind and hail damage
- 15% of claims
- Average cost to business owner: $26,000.
- 10% of claims
- Average cost to business owner: $35,000.
- Customer slip and fall
- 10% of claims
- Average cost to business owner: $20,000.
According to The Hartford study, more than 40 percent of small businesses will submit a claim within the next 10 years. Will your business be covered? The Insurance Shop specializes in designing small businesses insurance solutions with the right coverage for the right price. Let us guide you through identifying your risks, and the coverages you need to mitigate those risks, so your business can have its best chance at success.
1The Hartford Newsroom
How Can I Reduce my Risk?
Reducing risk in your business can be as simple as locking doors and making sure wet floor signs are provided. There are additional measured steps that you can take to mitigate more specific risks. For example, to try to prevent burglary and theft a business owner should conduct proper background checks on all employees, invest in some level of a security system, put up fences and gates around company property and install sufficient interior and exterior lighting. Other hazards like inclement weather, fire, water damage and freezing damage can be mitigated as well through employee training, maintaining the landscape, alarm systems and drills.
Frequently Asked Questions
- What is not included in any BOP?
BOPs do NOT cover professional liability, auto insurance, workers compensation or health and disability insurance. You'll need separate insurance policies to cover professional services, vehicles and your employees. The general rule states that a peril cannot be covered by the BOP if it is already covered under another policy.
- What makes a business eligible for a BOP?
BOPs were designed for small businesses in low-risk industries. A retail store, a small restaurant, small business office or a hair salon would all be good examples of eligible businesses. Eligibility coverage varies, but the majority of our insurance carriers use the following criteria:
- Annual revenue, more than $5 million typically makes you ineligible.
- Size of your primary location, large facilities such as warehouse and plants are ineligible.
- Number of employees, typically businesses with more than 50 employees are ineligible.
If any of these factors make your business ineligible then you should look at a commercial package policy (CPP), instead. Much like a BOP, a commercial package policy is a highly customizable package of policies, however, CPPs are geared more for mid- to large-sized businesses.