March 24, 2020
If you have dealt with many commercial insurance policies, you might have heard the term “business owners policy (BOP) insurance.”
You might be thinking to yourself, “Aren't all commercial insurance policies for business owners?”
Yes, but a business owners insurance policy is a specific type of insurance policy for certain types of businesses.
Business owners policies are designed to accommodate small and low-risk businesses. These companies typically don't need a custom-built insurance program with specific limits for all coverages.
It combines all the core coverages (property, general liability, business income) on a standardized form. A BOP also throws in additional coverages to help you fill common gaps.
Insurance companies realized that small businesses don't have attorneys or risk managers, nor do they want to spend hours and countless meetings going over various coverages. Instead, they want a robust insurance solution that is low cost and easy to buy.
That is how the business owners policy was born.
That said, if you aren’t both a small business or one that is low hazard, you will not qualify – nor should you.
If you are a larger business or have large property or liability risks, you need to review your insurance limits individually and take a more hands-on approach anyway.
Here are some of the small businesses that frequently qualify for a BOP insurance policy:
As you can see, these businesses are generally smaller and very low hazard.
An example of a high hazard business would be a demolition contractor, a transportation company, oil and gas contractors, and so on.
A business owners policy includes your core coverages in one place so that you do not have to source expensive and complicated insurance policies for each of your risks.
Plus, you usually have the option to bundle the following additional coverages:
Property In Transit
Ordinance & Law
The largest benefit to purchasing a business owners policy is also the reason why many choose not to purchase it. Simply put, a business owners policy is an easy solution with heavy limitations.
Need to meet specific insurance requirements for a big job? The BOP might not be for you.
Need higher limits or broader coverage terms? The BOP might not be right for you.
Is your building larger and you cannot get the appropriate coverage limits on a BOP? The BOP is probably not an optimal solution for you.
Luckily, those who have greater insurance needs than what a BOP can provide aren’t left out in the cold. You can purchase a commercial package that is geared toward middle-market businesses, and still get the savings of bundling but have more flexibility in coverage.
Chubb is a large insurance carrier that serves businesses of all sizes throughout a wide range of industries. They are a popular option for business owners policies, but they also have commercial packages and monoline coverages available for larger or high hazard clients. They have an AM Best rating of A++ (Superior) with a stable outlook.
CNA is another large insurance carrier that underwrites a broad range of insurance coverage. They are a popular option for technology companies, artisan contractors, and professional offices. They have an AM Best rating of A (Excellent) with a stable outlook.
When talking about bundled or pre-packaged insurance policies, it is important to note that not all policies are the same.
Since the intent of the policy is to cover low-hazard small businesses, sometimes insurance companies can use coverage limitations or exclusions to ensure that they are not covering any substantial risk.
For example, there are insurance companies that will write your business on a business owners policy, but at a premises or operations limitation. This confines your insurance coverage only to your business address or restricts your coverage to certain activities. Numerous problems come along with that, so avoid it if you can!
Additionally, insurance carriers can make sure that they are not covering any of your related operations. This can show itself in exclusions such as the subcontractor/independent contractor exclusion, or an exclusion that voids coverage for any claim arising from a construction or remodeling project.
These are huge problems and can leave you exposed to serious consequences.
We frequently see more insurance carriers add these exclusions and offer lower-priced quotes. In this scenario, the minimal price difference does not justify what you are giving up.
There are certain exclusions that you might be able to live with, though. Due to the fast and easy nature of this insurance product, insurance companies might do less loss control or fewer inspections on these customers.
Certain business owners policies can stipulate that you insure your property to value or face a penalty. We believe that for many customers, this is fair and worth it. You give them accurate information and they will make your insurance more convenient.
Each business has different insurance and risk management needs. If you are looking for a product that is easy and you run a small, low-hazard business, this sort of policy might be a great solution for you.
If you are interested in getting a business owners policy quote, let us know! We will work with you to determine what exposures you have and suggest the best insurance products for your business.
Not a LandesBlosch client yet? We're here if you need us. Schedule a free consultation to talk about your insurance with one of our insurance experts.