A Business Owner Policy or BOP is an insurance package that assembles the basic coverages required by a business owner in one bundle. It is usually sold at a premium that is less than the total cost of the individual coverages. Business Owners Policies are usually for small and medium-sized businesses and typically contain business interruption insurance, which provides reimbursement for up to a year of lost revenue resulting from an insured property loss.
A typical business owner policy includes: property insurance (building and/or contents), business interruption insurance, crime insurance, vehicle coverage, liability insurance and flood insurance. Additional components may be added to the original package if the business has additional risks not included in the typical policy.
• Special Form (all-risk) coverage covers against all risks – except those specifically excluded
• Named-peril coverage covers only against specific perils named in the policy.
When it comes to insurance for your physical property, you want to make sure to get a policy written on an special form basis rather than on a named-peril basis. While the latter only covers the specific perils named in the policy, a special form policy will cover you for anything (unless specifically excluded).
If your local or regional location is inclined toward a specific calamity, you should consider additional insurance (such as earthquake or flood). A business owner’s policy (BOP)–a ready-made program for small businesses–or a special multiple-peril plan may be a better fit for a small to medium sized business.
Replacement cost insurance will replace your property at current prices, regardless of what you paid for it, and thus protect you against inflation and depreciation. However, there’s usually a provision that your total replacements can’t exceed the policy cap. For example, if you have a 40,000-square-foot facility that would cost $100 per square foot to replace, the total replacement cost ($4 million) may exceed your $1 million policy limit. To protect yourself, buy replacement insurance with an inflation guard, which adjusts the cap on the policy to allow for inflation. If this isn’t possible, simply review your policy limits from time to time to make sure you have adequate coverage. A replacement-cost estimation should be done periodically to ensure the proper amount of coverage is in force.
With coinsurance, the owners of a building can actually share the potential loss with the insurance company if they’re willing to share the premium cost. These terms are crucial if you are on either end of a leasing agreement. A common percentage of market value of buildings used in coinsurance is 80 percent, with the owner bearing the cost of the other 20 percent in the event of a complete loss.
Professional Liability/Errors and Omissions
The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by General Liability insurance policy which addresses more direct forms of harm. Professional liability coverage also provides for the defense costs, including when legal action turns out to be groundless. Coverage does not include criminal acts. Professional liability insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
Professional liability insurance may take on different forms and names depending on the profession. For example, in reference to medical professions it is called malpractice insurance, while errors and omissions (E&O) insurance is used by insurance agents, consultants, brokers and lawyers. Other professions that commonly purchase professional liability insurance include accounting, engineering and financial services, advertising, design, construction and any business that provides advice, counsel or a professional service to others for a fee. Some charities and other nonprofits/NGOs are also professional-liability insured.
The policy will not include land, but can include landscaping, satellites or antennas, construction materials in transit, scaffolding, construction trailers, theft of materials from the job site and signs that are not attached to the building. It may be possible to obtain additional coverage for things not included in the standard policy.
The policy must be purchased when the project is less than 30% complete and coverage ends when the owner takes possession, 90 days have passed since the completion of construction, or the insured abandons the project with no plans to complete it.
The named insured will usually be the property’s contractor or developer, but in some cases it is the building owner or homeowner.
This type of policy often requires builders to have a minimum amount of experience (such as 2-3 years).
Business Auto/Fleet insurance
It is recommended that a company obtain a business automobile policy even if it does not own vehicles if its employees use personal vehicles for business purposes. In the event of a serious accident the employee may not have enough personal liability coverage to adequately protect the business.
Liquor Liability/Dram Shop
In addition to a permanent establishment that serves liquor, any event that is open by invitation or general public that will be serving liquor should obtain a Dram Shop policy for the event. Store or business openings, charity benefits would be advised to get this insurance for the date/s of the event. For entertaining in one’s home, it is not be necessary to get Dram Shop as Homeowners and Personal Umbrella policies would be in place in the event of a claim.
Workers’ compensation should not be confused with Disability Insurance or Unemployment Compensation. Workers Comp only pays workers who are injured on the job, while disability insurance pays out regardless of when or where the insured is injured or disabled. Unemployment compensation is controlled and obtained by the state and is not an insurance product.
Cyber Liability (Network Security/Data Breach/Privacy Liability)
The most common way for such a data breach is surprisingly employee error. A stolen or misplaced laptop or briefcase with unsecured information is the number one culprit. Breached information can be digital or paper files. Information exposed or stolen by a hacker or other criminal who has gained access to the firm’s electronic network is the second.
Small to medium-sized businesses are the most at risk for a cyber-breach. These businesses may have less security on their computers, but more importantly, they have less resources to pull from in the event of a claim. The costs to defend and resolve a cyber-breach can be extensive. Protecting client and customer data is the law.