Insurance companies and their professional agents often combine coverage from a number of policies into a package sold as a single contract. The most common policy for building and business property insurance is a Business Owners Policy (BOP).
The BOP combines coverage for all major property and liability insurance risks into a single policy appropriate for most small businesses. The BOP includes business income insurance, which is also referred to business interruption insurance. This coverage compensates a business owner for lost income after a disaster. Business income insurance also covers the extra expense often incurred if a business is forced to operate out of a temporary location.
Specific risks associated with a business often require a variety of additional coverage is added to the basic BOP. For example, if a business uses electronic commerce, coverage for lost income and extra expenses can be added if the business is damaged due to a computer virus or hacker.
Only small- to medium-sized businesses that meet certain criteria are eligible for a BOP. The size of the premises, the required limits of liability, the type of business and the extent of offsite activity must all be considered. BOP policy premiums are based on these factors, along with location, building construction, security features, financial stability, and fire hazards.
Most small businesses need to purchase a minimum of four types of insurance.
- Property Insurance - Property insurance compensates a business if its property is lost or damaged due to occurrences such as fire or theft. Property insurance covers not only a building or structure, but as “personal property”, such as office furnishings, inventory, raw materials, machinery, and computers.
- Liability Insurance – Any business can be sued. Liability insurance pays damages if your business is found liable, up to the policy limits. It also includes attorneys’ fees, other legal defense expenses, and medical bills of people injured by, or on the premises of your business.
- Business Auto Insurance - A business auto policy covers autos owned by a business. The insurance pays any costs resulting from bodily injury or property damage for which the business is legally liable, up to policy limits.
- Workers Compensation Insurance - An employer must have workers compensation insurance when there are more than a certain number of employees. Workers compensation insurance pays for medical care and replaces a portion of lost wages for an injured employee.