Volume 5, Issue 5
Is a BOP Right for My Business?
When you consider all the things that could go wrong with a business, its no surprise that small business owners are often described as risk takers. However, there are two risk exposures that business owners cannot afford to overlook: property loss due to perils such as fire, theft, wind, or water damage, andliability loss for injuries sustained by individuals while on business premises and/or during operation of the business. Although self-insuring was once an option, in todays litigious society, it is not cost-effective or a solution, particularly for potentially catastrophic losses. A business owners policy (BOP) can play a crucial role in risk management.
A BOP bundles prearranged property and liability coverage in one package by providing property coverage for a building and its contents, coverage for loss of business income after an accident, and liability coverage for physical injury or physical damage caused by an employee, on-premise risk, operation, or product. Note that health insurance, workers compensation, and business automobile coverage are typically not included in the standard BOP.
The primary advantages of a BOP are ease of handling, streamlined rating procedures, and a reduced need for detailed risk management decisions. Typically, a BOP is less expensive than purchasing several policies separately.
Generally, specific criteria must be met in order to qualify for this type of policy. First, your business should be considered a good risk so that premiums can be priced more affordably than individual policies. For instance, a small neighborhood bookstore selling books on gardening may have an easier time obtaining a BOP than a company that is in the building demolition business, whereby serious accidents may be more likely to occur. Second, your business should have ordinary insurance needs without the potential for unusual exposure to loss. Again, a demolition company would have more unusual exposure to loss. A standard BOP that does not adequately meet the needs of a particular business may be customized to meet those specific needs, which often makes a BOP an appropriate choice for small businesses.
While every business is unique, many businesses are exposed to similar types of risk. If the risk exposures of your business are fairly common, you may want to explore the benefits of a BOP. Having most risks covered under one policy can prove to be a cost-effective risk management tool. For more information on BOPs, give us a call. One of our qualified insurance professionals will be happy to help you determine if a BOP is right for your business.