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Business Owners Policy

Business Owners Policy

Business Owners Policy. As many as half of all businesses are involved in a lawsuit within any particular year, according to the U.S. Small Business Administration. At some future point, even the smallest business is subject to being called into court to answer to a charge of negligence or liability. Carrying business insurance such as a business owners insurance policy or BOP policy is important to continuing the growth and success of your business uninterrupted in the event of a claim, catastrophe, or peril.

Vandalism, theft, and fire are all known perils that can close your business down permanently. Many business owners find that their businesses simply cannot recover after a devastating loss. A business owner's policy protects your business from the risks faced in a perilous situation. This policy provides both liability insurance and property insurance in one custom-tailored package based on your business' needs. If you own a small or mid-sized business, this policy is right for you.

A business owners policy protects your company from lawsuits with rates as low as $27/mo. Get a fast quote and your certificate of insurance now.

Below are some answers to commonly asked BOP questions:

How Much Does A Business Owners Policy Cost?

The average price of a standard $1,000,000/$2,000,000 Business Owners Policy for small businesses ranges from $27 to $59 per month based on location, industry payroll, sales and experience.

ISO publishes rate tables in the commercial lines manual. Provisions for credits, increased limits, etc., are made. Individual companies may employ variations by filing their own unique rating schedules.

Charges are made for the property items based upon the construction, occupancy, protection class, and limits for each item. There is no separate charge made for the business income coverage.

The liability rating process is based upon classification of the operation, the limit of insurance selected, and the rating territory of the risk.

No charge is made for other coverages that are part of the BOP, but optional coverages must be purchased. Increased additional coverage or coverage extension limits and some endorsements require additional premium charges, and deductible and reductions in coverages result in premium reductions.

What Types Of Businesses Are Eligible For A BOP?

Many retail or wholesale operations, artisan contractors, or convenience stores, grocery stores and supermarkets with or without gasoline pumps are eligible.

Small to medium-sized apartment risks, condominium properties, offices, non-manufacturing businesses, and a limited number of service and processing risks are also eligible. Restaurants are also eligible. However, many insurance companies file their own deviations to the eligibility criteria and offer numerous options.

It is not unusual for some of them to insure some manufacturing classes and larger retailers under the Businessowners Coverage Form or an enhanced version of it.

How Does The The ISO Businessowners Coverage Form Protect Businesses?

The ISO Businessowners Coverage Form uses the homeowner's policy approach to package insurance coverages for eligible businesses. By selecting an amount of insurance on building and/or business personal property, the insured automatically receives a broad range of additional coverages with a single indivisible package premium. It is designed for the following:

  • A wide variety of retail risks, motels, processing, and service risks
  • Convenience food stores, grocery stores, and supermarkets with gasoline pumps
  • Laundries and self-storage facilities
  • Offices and office condominium associations
  • Restaurants under 7,500 square feet
  • Small specialized or artisan contractors
  • Small to medium sized apartment complexes and residential condominium associations
  • Wholesale operations

BOP Coverages

The ISO Businessowners Coverage Form is made up of three major sections:

What Does BOP Section I - Property Cover?

Buildings can be more than just a single building. The insurance company pays for direct physical loss or damage to covered property at premises listed and described on the declarations but only if the loss or damage is caused by or that results from a covered cause of loss:

  • Buildings and structures at the premises described in the declarations
  • Completed additions
  • Permanently installed fixtures
  • Machinery and equipment
  • Personal property owned by the landlord in apartments or rooms furnished by the insured as landlord, and common areas
  • Outdoor fixtures
  • Personal property owned by the insured used to maintain or service the buildings and structures on the premises, including fire-extinguishing equipment, outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, and laundering.

The following items are also covered as part of the building but only if they are not separately covered by other insurance:

  • Additions under construction
  • Alterations and repairs
  • Materials, equipment, supplies and temporary structures on or within 100 feet of the described premises used for making alterations or repairs

Business Personal Property

Business personal property (BPP) is more than just the contents of a building. The following business personal property is covered when a limit of insurance appears on the declarations and when it is in the described building and within 100 feet of the premises or building while in the open or in or on a vehicle.

The following items are considered business personal property if they are in or on the buildings at the described premises or in the open:

  • Property owned by the insured and used in the business
  • Property leased by the insured for which the insured has a contractual responsibility to insure
  • Property of others in the insured's care, custody, and control but only to the extent of the insured's legal liability plus the insured's cost of labor, materials or services on the property
  • Tenant's improvements and betterments

Property Not Covered

A number of types of property are not covered:

  • Aircraft, autos, motor trucks, and other vehicles subject to motor vehicle registration
  • Bullion (available only through the burglary and robbery optional coverage)
  • Money and securities
  • Contraband; land, water, growing crops or lawns; outdoor fences; radio or television antennas, including satellites
  • Detached signs (except as provided for under coverage extensions); trees, shrubs, plants (except as provided for under coverage extensions)
  • Watercraft (including motors and accessories) while afloat

Additional Coverages Provided

There are 18 additional coverages in the BOP. Most of the coverages are similar to additional coverages in the commercial property forms such as debris removal, preservation of property, fire department service charge, collapse, pollutant coverage, increased cost of construction, glass expense, fire-extinguishing recharge, and tear out to stop water damage. Most of these coverages have a dollar limitation or other explanations that are also similar to the commercial property coverage.

Two crime coverages are also automatically provided. Money orders and counterfeit money coverage and forgery coverage are provided for fairly low limits.

The two most important additional coverages are business income and extra expense. These are included without dollar limits; instead, coverage is limited to the actual loss sustained for up to 12 months.

These two coverages can mean the difference between an insured business being able to re-open following a loss or being forced to close permanently. Coverage is also provided for business income from dependent properties and loss of business income due to civil authority actions.

Coverage Extensions Provided

The coverage extensions are similar to those in the commercial property forms. They are newly acquired or constructed property, business personal property off-premises, outdoor property, personal effects, valuable papers and records, accounts receivables, and business personal property in portable storage units.

All are subject to small limits, but the limits can be increased on the declarations page.

Optional Coverages Available

There are four optional coverages built into the BOP. A limit must be entered on the declarations page for the particular coverage to be activated. The coverages are: outdoor signs, money and securities, employee dishonesty, and mechanical breakdown.

What Does BOP Section II - Liability Cover?

The insuring agreement requires the insurance company to pay amounts an insured becomes legally obligated to pay as damages because of bodily injury, property damage, or personal and advertising injury as long as this insurance provides coverage.

Damages include care, loss of services, and death. This obligation includes a duty on the insurance company's part to defend any suit that seeks damages. The duty exists only if the loss is or may be covered and ends only when loss payments use up the limits of insurance.

The coverage form identifies situations that are covered as well as those that are excluded. It also specifically states that coverage applies to only incidents that are not carryovers from prior policies or prior policy periods.

Business Liability Limits

The declarations page does not list all of the applicable limits. It lists only three limits. The general aggregate and products-completed operations aggregate limits are not shown but they still exist. This is an important warning—just because an aggregate is not shown does not mean that an aggregate doesn't apply. The applicable limits are:

Liability and Medical Expenses Limit: is the most paid for a single bodily injury, property damage, or medical event on a single personal and advertising offense. Insures bodily injury and property damage liability and the legal obligations that arise from an occurrence. It also covers lawsuits and their associated costs. The limits of insurance selected should be high enough to handle serious claims.

Medical Expense Limit: is a sublimit within the liability and medical expenses limit that caps medical expense payments to any one person. Medical expenses coverage applies to medical expenses of individuals injured on your premises or due to your operations, without regard to fault.

Damage to Premises Rented to You Limit: is the most that is paid for fire or explosion to any premises rented or temporarily occupied by the insured. This is NOT a sublimit and is NOT subject to the general aggregate.

General Aggregate: is not listed on the declarations. It is twice the liability and medical expenses per-occurrence limit. This does not apply to the products-completed operations hazard.

Products-Completed Operations Hazard Aggregate: is not listed on the declarations. It is twice the liability and medical expenses per-occurrence limit.

Business Liability Exclusions

The business liability exclusions are very similar to the commercial general liability form.

What Does BOP Section III - Common Policy Conditions Cover?

These conditions apply to both liability and property:

  • Cancellation: The first named insured can cancel at any time by telling the insurance company that it plans to do so. The insurance company can cancel under only certain circumstances and with the advance number of days notice the circumstances permit, such as ten days advance notice for non-payment of premium or 30 days advance notice for any other reason. Notice periods vary, depending on the state where the named insured's business is located.
  • Changes: Changes to terms in the coverage form can be made only by endorsements the insurance company issues.
  • Concealment, Misrepresentation, or Fraud: Any of these acts by the named insured at any time with respect to a material fact that relates to the coverage provided voids coverage.
  • Examination of Your Books and Records: The insurance company has the right to examine the named insured's books and records that relate to this coverage form at any reasonable time and as often as necessary during the policy period and for up to three years after coverage ends.
  • Inspections and Surveys: The insurance company can conduct inspections and surveys at any time and they are for its benefit, with no expressed or implied warranties to other parties. The insurance company also has the right to not make inspections or surveys if it so chooses.
  • Insurance Under Two or More Coverages: The most paid if a covered loss occurs is the actual value of the loss, regardless of the number of coverages that apply to it.
  • Liberalization: Revisions to the coverage form that broaden coverage without an additional premium charge automatically apply if they become effective during the policy term or within 45 days before its inception date.
  • Other Insurance does the following:
    • Clarifies that this insurance pays only the portion of a loss that exceeds the amount due from the other insurance, whether collectible or not, but not more than the limit of insurance that applies
    • States that business liability insurance is excess over any other insurance that insures for direct physical loss or damage, any other primary insurance available, and any coverage that applies where the named insured is an additional insured on another coverage form or policy
    • Removes the insurance company's duty to defend in cases where this insurance is excess and where the primary insurance has the duty to defend. It also states that the insurance company has the option to assume the defense if no other carrier does so.
  • Premiums: The first named insured pays the premium and receives all returns. Policies issued on a continuous basis are not continued if the premium is not paid prior to the anniversary date. Premiums can be adjusted because of changes to the named insured's operations during the policy year.
  • Premium Audit: The policy is subject to audit after expiration. The final premium is based on the actual exposures during the policy term if the premium on the declarations is an advance or deposit premium. It details the conditions that apply to the audit and the requirements and responsibilities of each party.
  • Transfer of Rights of Recovery Against Others to Us: The insurance company receives the rights to recover from other parties that may have caused a loss it paid. The named insured can exclude certain entities from being subject to recovery efforts if it does so in writing before a loss occurs.
  • Transfer of Your Rights and Duties Under This Policy: The named insured's rights and duties cannot be transferred without the insurance company's written consent. A specific exception and condition applies if an individual named insured dies that involves appointing a proper legal representative.

What Endorsements Are Available For A Business Owners Policy?

A number of endorsements are available to tailor the BOP to meet the needs of the individual insured. These endorsements are much more limited than those available under the commercial property and commercial general liability coverage parts. However, the following types of endorsements and more are available for some customizing:

  • Spoilage
  • Food contamination
  • Ordinance or law
  • Functional valuation
  • Earthquake
  • Condominium endorsements
  • Windstorm/hail percentage deductible endorsement

  • Various additional insureds
  • Hired and non-owned auto liability
  • Liquor liability coverage
  • Employee benefits
  • Professional liability for specific professionals such as: funeral directors, owners of hearing aid stores, opticians, beauticians, barbers, printers, pharmacists, and small-animal veterinarians.

Avoiding Myths When Purchasing A BOP Policy For Your Business

If you've been teetering on the fence and unsure if a BOP policy is right for you, then dispelling some of the myths surrounding these policies is a good move. Let's look at some common misnomers about business owners insurance policy policies.

Myth: BOP policies are for big businesses; my business is too small for a BOP policy.

This is an absolutely untrue statement. This type of policy is actually not an option for big businesses; it's tailor made for small and mid-sized businesses.

Myth: General liability covers property loss and business interruption costs.

This is also untrue. General liability insurance will not protect your business from either of these inherent risks. General liability insurance is only for acts that occur due to your actions or that occur on the premises of your business.

Myth: An umbrella policy is sufficient for covering business equipment losses.

Again, untrue. This type of policy covers personal liability, not business liability. It does sometimes extend to cover business equipment under a specific set of circumstances, but the coverage is limited.

Myth: Your business is safe since it is an incorporated business with just one location or operating from the owner's home.

Although the incorporation of your business does make it its own entity legally, any attorney worth his salt can easily finagle his way around the corporate "veil" to find a business owner personally responsible. With a business owners insurance policy policy, the liability portion of the policy protects your personal interests.

Myth: You're safe because you're incorporated, only have one location, or are home-based.

While incorporating will make your business a separate legal entity, any knowledgeable lawyer can find a way to remove that corporate protection and make you personally responsible, putting both your business and personal assets at risk. Incorporating offers zero protection against “tort” wrongs, which are judgments related to negligence, malpractice, car accidents and even slips and falls on your property. Luckily, the liability portion of a business owners insurance policy protects you against these risks.

Moreover, if you work from your home and rely on a conventional homeowner's policy to guard against business liability, you may find yourself sorely discouraged when your policy specifically rules out business operation in its terms. A better practice is to buy a separate policy so that your insurer understands that business and home are separated, and liability in one doesn't translate to liability in another.

Myth: Your work is conducted at your client's location, so a BOP policy is useless.

A BOP policy is essential if you are conducting business on site. Electricians, caterers, and others who work in people's homes put themselves out there as far as liability goes, and an accident at a client's home or damage to a client's property can leave you holding the bag without an effective BOP policy in place.

Myth: A BOP policy is not essential because the client doesn't require it.

A BOP policy isn't really about protecting the client. At its core, it protects your business. Even if the clients has no opinion about your insurance coverage, protecting yourself from litigation, claims, and loss means having the right coverage in place at all times. Moreover, buying a BOP policy for a short time and then dropping coverage can make your policy cost more in the long run.

Myth: Your contract with your client protects you from liability.

Think again. While having a strong contract in place is always a good idea, the truth is that lawyers can always find an angle to sue, despite the contract's language. Even if the claim has no merit, the cost of defending yourself in court can be astronomical and leave a dent in your business' financial health.

Myth: BOP policies are too expensive for my business.

The opposite is true. business owners insurance policy policies are affordable, and the risk they mitigate is priceless. Most people spend just a few hundred dollars per year for a basic BOP policy. This is a small price to pay for peace of mind in knowing that your business is protected. An independent agent can compare rates with multiple insurers to help you find the right coverage for your budget.

Business Owners Policy - The Bottom Line

The type of business you own, the number of people who work for you, and your sales into how much you pay for bar insurance. The location of your business, your claims history, and other important factors also play a part. Work with your licensed commercial agent to find a mix of quotes from insurance companies. This can make it easy to get the right policy for your specific needs.

'Real Life' Court Cases Involving BOP Policies:

Insurance Legal Cases
Seaport Park Condo. v. Greater New York Mut. Ins. Co

The pipes of the rooftop cooling system of Seaport Park Condominium (Seaport) burst on January 12, 2004, allegedly due to freezing temperatures. Seaport had purchased a Businessowners Policy effective September 30, 2013, from Greater New York Mutual Insurance Company (GNY) providing coverage on the seven-story condominium apartment building.

A claim was submitted to GNY. Expert adjusters were retained to inspect the damage and determine the cause of loss. The burst pipes were believed to be in the interior of the unit and a conclusion could not be reached. At a meeting of all interested parties, it was agreed that Matco, Seaport's contractor, would remove the old tower and install a new one and would store the old tower for further inspection. Matco, however, destroyed the tower.

GNY denied the claim based upon a condition of the policy that required Seaport to preserve the damaged property for inspection. Seaport commenced an action against GNY. The motion court cited the absence of documentation stating that further inspection of the tower was needed and any obligation to store the cooling system once it was removed from the building when it ruled in favor of Seaport. GNY appealed.

The decision was reversed because the insurance contract was between Seaport and GNY and it required that damaged property be available for inspection. Agreements between Matco and Seaport and the error on Matco's part did not relieve Seaport of that responsibility.

(Seaport Park Condo. v. Greater New York Mut. Ins. Co., 39 A.D.3d 51, 828 N.Y.S.2d 381 (2007))

Phillips v. Parmelee

Daniel G. Parmelee or Aquila Group LLC (Seller) signed a conditional real estate report indicating that it was not aware of the existence of asbestos on the premises of an apartment building it was selling. Phillips (Buyer) acquired the property. Asbestos was discovered in the building by their contractor when it cut asbestos-wrapped ducts which dispersed asbestos throughout the building. Buyer sought action against Seller.

Seller insured the apartment building under a businessowners policy from American Family Mutual Insurance Company (American) at the time of the sale and so requested that American respond to the action. American denied coverage based upon the asbestos exclusion and filed for summary judgment. The circuit court concluded that American had no duty to defend because the exclusion precluded coverage.

The decision was appealed by Buyer, which alleged breach of warranty and negligence in the failure to report asbestos in the structure. The asbestos exclusion read [in part], "This insurance does not apply to ... "property damage" ... with respect to:

Any loss arising out of, resulting from, caused by, or contributed to in whole or in part by asbestos, exposure to asbestos, or the use of asbestos. "Property damage" also includes any claim for reduction in value of real estate or personal property due to its contamination with asbestos in any form at any time.

Buyer contended that the exclusion did not specifically state that it applied to the "dispersal" or "presence" of asbestos. Both the Appellate court and the Supreme Court of Wisconsin affirmed the decision based upon the wording “any loss” within the exclusion.

(Phillips v. Parmelee, 2013 WI 105, 351 Wis. 2d 758, 840 N.W.2d 713)

Types Of Small Business Insurance - Requirements & Regulations

Perhaps you have the next great idea for a product or service that you know will appeal to your local area. If you've got a business, you've got risks. Unexpected events and lawsuits can wipe out a business quickly, wasting all the time and money you've invested.

Operating a business is challenging enough without having to worry about suffering a significant financial loss due to unforeseen and unplanned circumstances. Small business insurance can protect your company from some of the more common losses experienced by business owners, such as property damage, business interruption, theft, liability, and employee injury.

Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a loss or recovering with minimal business interruption and financial impairment to your company's operations.

Small Business Information

Insurance is so important to proper business function that both federal governments and state governments require companies to carry certain types. Thus, being properly insured also helps you protect your company by protecting it from government fines and penalties.

Small Business Insurance Information

In the business world, there are many risks faced by company's every day. The best way that business owners can protect themselves from these perils is by carrying the right insurance coverage.

The The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.

Commercial insurance is particularly important for small business owners, as they stand to lose a lot more. Should a situation arise - a lawsuit, property damage, theft, etc. - small business owners could end up facing serious financial turmoil.

According to the SBA, having the right insurance plan in place can help you avoid major pitfalls. Your business insurance should offer coverage for all of your assets. It should also include liability and casual coverage.

Types Of Small Business Insurance

Choosing the right type of coverage is absolutely vital. You've got plenty of options. Some you'll need. Some you won't. You should know what's available. Once you look over your options you'll need to conduct a thorough risk assessment. As you evaluate each type of insurance, ask yourself:

  • What type of business am I running?
  • What are common risks associated with this industry?
  • Does this type of insurance cover a situation that could feasibly arise during the normal course of doing business?
  • Does my state require me to carry this type of insurance?
  • Does my lender or do any of my investors require me to carry this type of policy?

A licensed insurance agent or broker in your state can help you determine what kinds of coverages are prudent for your business types. If you find one licensed to sell multiple policies from multiple companies (independent agents) that person can often help you get the best insurance rates, too. Following is some information on some of the most common small business insurance policies:

Business Insurance Policy Type What Is Covered?
General Liability InsuranceWhat is covered under commercial general liability insurance? It steps in to pay claims when you lose a lawsuit with an injured customer, employee, or vendor. The injury could be physical, or it could be a financial loss based on advertising practices.
Workers Compensation InsuranceWhat is covered under workers compensation insurance? This type of insurance protects a business and its owner(s) from claims by employees who suffer a work-related injury, illness or disease. Workers comp typically provides the injured employee with benefits to cover medical expenses, a portion of his/her lost wages, rehabilitation costs if applicable, and permanent partial or permanent total disability.
Product Liability InsuranceWhat is covered under product liability insurance? I pays an injured party's settlement or lawsuit claim arising from a defective product. These are usually caused by design defects, manufacturing defects, or a failure to provide adequate warning or instructions as to how to safely use the product.
Commercial Property InsuranceWhat is covered under business property insurance? General liability policies don't cover damages to your business property. That's what commercial property insurance is for. It protects all of the physical parts of your business: your building, your inventory, and your equipment, giving you the funds you need to replace them in the event of a disaster. If you work from home, you might consider a Home Based Business Insurance policy instead.
Business Owners Policy (BOP)What is covered under a business owners policy (BOP)? This is a policy designed for small, low-risk businesses. It simplifies the basic insurance purchase process by combining general liability policies with business income and commercial property insurance.
Commercial Auto InsuranceWhat is covered under business auto insurance? This type of insurance covers automobiles being used for business purposes. This could include a fleet of business-only vehicles or a single company car. In some cases it might cover your car or your employee's car while they're being used for business. These policies have much higher limits, ensuring you can cover your costs if one of these vehicles gets into an accident.
Commercial Umbrella PoliciesWhat is covered under commercial umbrella insurance? This type of policy is a sort of "gap" insurance. It covers your liability in the event that a court verdict or settlement exceeds your general liability policy limits.
Liquor Liability InsuranceWhat is covered under liquor liability insurance? It covers bodily injury or property damage caused by an intoxicated person who was served liquor by the policy holder.
Professional Liability (Errors & Omissions)What is covered under professional liability insurance? This type of business insurance is also known as malpractice oe E&O. It covers the damages that can arise from major mistakes, especially in high-stakes professions where mistakes can be devastating.
Surety BondWhat is covered under surety bonds? Bonding is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation).

Who Needs General Liability Insurance? - Virtually every business. A single lawsuit or settlement could bankrupt your business five times over. You might also need this policy to win business. Many companies and government agencies won't do business with your company until you can produce proof that you've obtained one of these policies.

Business Insurance Required by Law
Small Business Commercial Insurance

If you have any employees most states will require you to carry worker's compensation and unemployment insurance. Some states require you to insure yourself even if you are the only employee working in the business.

Your insurance agent can help you check applicable state laws so you can bring your business into compliance.

Other Types Of Small Business Insurance

There are dozens of other, more specialized forms of small business insurance capable of covering specific problems and risks. These forms of insurance include:

  • Business Interruption Insurance
  • Commercial Flood Insurance
  • Contractor's Insurance
  • Cyber Liability
  • Data Breach
  • Directors and Officers
  • Employment Practices Liability
  • Environmental or Pollution Liability
  • Management Liability
  • Sexual Misconduct Liability

Whether you need any or all of these policies will depend on the results of your risk assessment. For example, you probably don't need an environmental or pollution policy if you're running an IT company out of a leased office, but you would need data breach and cyber liability policies to fully protect your business.

Also learn about small business insurance requirements for general liability, business property, commercial auto & workers compensation including small business commercial insurance costs. Call us (855) 767-7828.

Additional Resources For Small Business Insurance

Protect your company and employees with the right commercial insurance policies. Read informative articles on small business insurance coverages - and how they can help shield your company from legal liabilities.

Small Business Commercial Insurance

Your small business faces many potential disasters including: fire, floods, theft, equipment breakdown, lawsuits from clients or customers and current & former employees. Any many other risks you haven't even thought about.

A small business commercial insurance program should provide protection for both larger and smaller disasters. The obvious things like fire, flood and theft most business owners think about... but what if a hacker infects your computers with a virus - and files containing private customer information like credit card and Social Security numbers are stolen?

Who is going to pay to fix your customers credit rating etc...? Will your insurance pay for the cost? You need to know that.

Your commercial insurance program should cover events that can close down your company, or cause it to lose revenue. Anything less than that is not enough coverage. Commmercial insurance doesn't cover everything, and all policies have exclusions and limits.

You need a written plan that allows you to get your operations back up and running as quick as possible.

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