Despite what you may think, not everyone qualifies for a business owners policy (BOP). A BOP is a way for certain businesses to bundle important coverages at a discounted rate. Typically, businesses that purchase a BOP are small businesses in low-risk industries.
Examples of high-risk industries are:
- Legal services
Some low-risk industries include retail shops, pet supply stores, bookstores, online apparel stores and more.
What is Considered a Small Business?
The requirements to be considered a “small business” vary depending on the industry and, occasionally, the insurance agency. In general, however, a small business has less than 100 employees and makes less than $1 million a year in revenue. The physical premises of the business should also be small, such as a single store or office. This, combined with a low-risk industry, may qualify a business for a business owners policy.
A BOP is geared for small businesses because it has policy limits and low flexibility in coverage options. Larger businesses in high-risk industries should consider a commercial package policy.
Does My Small Business Need a Business Owners Policy?
Whether you need a BOP or not depends on the coverage you already have. A BOP covers three areas:
- Property Coverage provides coverage for the physical property of the business and its contents. It provides compensation for damages and loss due to fire, lightning, smoke, wind, theft, vandalism and more.
- General Liability covers bodily injury and property damage that occur to a third party on the business premises. For example, if someone slips and falls in your restaurant, general liability will cover their medical expenses and possible legal fees if the victim decides to sue. It can also cover personal and advertising industry such as copyright infringement, libel and slander.
- Business Interruption Insurance helps cover lost income if a disaster makes it impossible for the business to continue operating. It may also cover the cost of temporarily moving the operation elsewhere.
Businesses that have the best chance of find a business owners policy have:
- Less than 100 employees
- A small location
- Good credit
- Low or no claims history
- Low risk
- Less than $1 million per year in revenue
- Low coverage needs
Is a Business Owners Policy Required?
There is no state or federal law demanding small businesses to have a BOP. Property coverage may be required by a lender, however.