MONDAY, DECEMBER 11, 2023
Every business needs to ensure that it has appropriate commercial insurance benefits in place. However, since every business is unique, then it is up to the owner to choose and implement the coverage that is best for them, based on their specific industry liabilities. That’s why there are numerous types of very specific insurance benefits that are commonly referred to by the umbrella term business insurance.
Small business owners often find that the best way to both afford and manage numerous benefits is to buy them as part of a business owners policy (BOP). Still, while BOPs are far-reaching, they are not all-encompassing, and they are not the only benefits that are necessary in order to fully insure your business. Therefore, you will need to work with your insurance agent to be certain that you appropriately customize your BOP and any additional coverage to your advantage.
BOPs in Brief
In reality, there is no single insurance policy known as business insurance. Instead, commercial operations will have to insure their assets and liabilities using a variety of different policies, each of which is designed to be used in various circumstances.
However, carrying multiple policies can be both a hassle for management and a significant cost. While small business owners can’t avoid this challenge altogether, they can invest in a BOP to make their benefits more cohesive. BOPs combine several foundational types of business insurance in one package, and at one price. They are also usually more affordable overall than the cost of buying plans piecemeal. While you will have to likely buy other policies alongside your BOP, the BOP can still provide the policy essentials that every business might need.
Coverage in Most BOPS
Generally, BOPs contain three to four benefits as standard coverage:
- Property insurance: You might own the building in which you operate. If something happens to it, you need to pay for repairs or replacements. This coverage might help you do so.
- Possessions insurance: Contents and physical assets within the business might sustain damage during mishaps. This coverage can help replace those items. In many BOPs, possessions insurance is part of the property insurance.
- Commercial general liability (CGL) insurance: You have a duty to your clients. If something happens to them when doing business with you, then you might have to pay for their losses. Coverage will often pay for bodily injuries or property damage you cause to third parties through your negligence (even unintentional negligence). It can also assist you in case the affected party takes legal action against you.
- Business interruption coverage: If a serious incident occurs in the business, then you might have to close temporarily. Yet, operating costs like salaries and utility bills might still beckon. This coverage helps you still pay those costs until you can reopen and start making money again. Coverage might also pay for temporary relocating the operation.
To calculate the various coverage limits within your BOP, you will need to consider factors like the value of your property and your company’s net worth. It’s essential to choose coverage based on how much you could stand to lose in case of a significant challenge, like an out-of-control fire in the business or a multi-million-dollar lawsuit. Your agent and a financial planner can help you better estimate these costs.
It Doesn’t Cover Everything
The coverage within a BOP is expansive, but you cannot assume that it covers everything you need to insure. You should view it as a starting point in building a more far-reaching business insurance portfolio. Other policies that you might need include:
- Equipment breakdown insurance: Coverage will often pay for breakdowns to important machinery. The breakdown might hamper operations, after all. Coverage might also pay for sudden HVAC system failures, phone outages and similar occurrences that impact operations.
- Cyber liability coverage: Computer systems might face risks of data theft or loss. If this happens, clients could suffer financial losses. Other threats, like identity theft, might also beckon. Coverage can help you pay for their data recovery and even lawsuits related to these incidents.
- Data loss coverage: A policy might pay to help you cover repairs to data systems after losses.
- Errors & omissions insurance: Your professional mistakes might cause financial losses to clients. This coverage might help you repay them for such losses.
- Inland marine coverage: If you need to ship or move items, this coverage will protect them during transport.
- Umbrella insurance: This is extra liability insurance that kicks in if your standard coverage surpasses its existing limits. Coverage might also pay for risks not covered by your CGL coverage.
In some cases, you can add this coverage to your BOP as endorsements. In others, you will have to buy separate policies. Your employee benefits, workers’ compensation and commercial auto insurance will be separate in all cases.
Though BOPs are not for everyone, they are great for small businesses through both their benefits offered and pricing structures. Still, the basic tenets of BOPs remain essential for all businesses, so use this policy as the guidepost to help you establish your own benefits, whatever those might be.
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