What is a BOP?
Like general property insurance coverage, the
property portion of the BOP offers named perils or all
risk coverage. Some policies will even include other
types of property
related insurance such as extra
expense policies as part of the package.
The liability portion of a BOP is structured quite
similarly to a stand-alone Commercial General Liability
(CGL) policy. The primary difference: A BOP gives you
much less
flexibility in determining your coverage
limits for particular claims. It's important, however,
to note that a BOP does not include professional
liability insurance, which
protects you from losses or
expenses resulting from claims of errors or omissions or
negligence in your business.
Business interruption insurance is generally included
in a BOP. Business interruption insurance covers lost
income and expenses incurred when a company suffers
disaster
related damage. Operating
expenses that continue to roll in even if business is
suspended, such as payroll, are also covered. BOPs
typically provide reimbursement for
up to a year of lost
revenue resulting from an insured property loss.
Who needs a BOP?
Almost every small business should look into a
business owner's policy for basic coverage. But to
qualify for a BOP, you have to meet certain criteria:
The company should
have 100 or fewer employees, and
revenues should not be more than $1 million. For
companies that exceed these two limits, purchasing
insurance a la carte is probably
the way to go, and
Commercial General Liability
insurance is a good place to start.
While it is one of the most common types of insurance
for small businesses, some companies may find the
coverage limits of BOPs to be too low, or may not like
the lack
of flexibility on options like coinsurance.
Keep in mind, however, that what the policy lacks in
flexibility it usually makes up for in lower premiums.
And although comprehensive, companies with a BOP
will still need to purchase other coverage such as
automobile insurance (also called fleet insurance)
and workers
compensation
separately.
For companies with particular risks specific to that
industry, an insurance broker should be able to
suggest types of additional coverage you
may need to
fully protect the company. For instance,
a dry cleaner would want to purchase additional
coverage in case of a mechanical breakdown since his
or her
business is so dependent on the performance
of the machinery.
Small businesses should always look into getting
more liability insurance than what is included in a
BOP since the amount and kind of liability facing
each business is
typically specific to their
industry. So a basic BOP usually won't be enough.
Commercial General Liability coverage should also
accompany a BOP.
What about Workers Compensation Insurance?
Workers compensation benefits provide coverage for
medical expenses as well as reimbursement for lost
wages when employees are injured on the job.
Workers
compensation coverage includes two types of
protection: workers' compensation and employer's
liability. The workers compensation portion of the
policy pays for
claims made by employees, and the
employer's liability portion pays the cost of
defending lawsuits filed against the company by an
employee or an employee's family.
