Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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bussiness owners policy

A business owner’s policy (BOP) is a combination of property and liability business coverage designed to meet the needs of small and medium sized businesses.

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The contents of any specific business owner’s policy can vary according to the needs of the insured business, but typically the BOP will provide coverage in seven broad areas, protecting the business against both property and liability issues.

The seven broad areas that may be in a business owner’s policy:

• Property insurance
• Business Income insurance
• Bodily injury
• Personal and advertising injury
• Medical payments
• Rented vehicles
• Equipment breakdown

Property Insurance

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This aspect of the business owner’s policy protects the business’ facilities, equipment and inventory. Business owners not only risk lawsuits lodged by customer, they also face common property risks. If the roof of a rented building leaks, it is the landlord’s responsibility to fix it. It is not the landlord’s responsibility to repair collateral damage, however. The business that owns its own building is responsible for all such repairs, of course. Adequate property business insurance can make all the difference in financial burdens caused by insured damages.

Business Income Insurance

Businesses may risk loss of income because of conditions outside the business owner’s control. One example is a widespread power outage that forces the business to close. Another might be a fire at a neighboring business that leads to water and smoke damage that prevents the insured business from opening for a time. A business owner’s policy insures the business against the resulting loss of income for the period.

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Bodily Injury, Property Damage Liability and Medical Payments Coverage

This type of coverage protects the business from instances when the employees, products or services of a business cause harm to anyone else or to the property of others. Lawsuits levied against big businesses that result in

huge settlements – such as the McDonald’s coffee lawsuit – make the local and national news. Those events are relatively rare, but businesses of all sizes deal with lawsuits on a regular basis.

Far more common are lawsuits arising from wet floors. One recent lawsuit of that type was levied against a grocery store by a woman who slipped and fell on a wet floor. She sued for medical expenses, lost wages and court costs, which is much more lenient than similar lawsuits, many of which seek punitive damages as well as actual monetary losses.

The business owner’s policy protects the business against all of these areas. Grocery stores routinely guard against the “wet floor” lawsuit – hence Walmart’s spongy – foam floor coverings in the produce department and all of those yellow “Wet Floor” signs the rest of us have to walk around.

Personal and Advertising Injury Coverage

This category of the business owner’s policy protects the small business from accusations in matters of copyright infringements, libel or slander. This is of particular importance to small and medium businesses that often strive to design their own marketing and advertising campaigns.

As an example, several years ago a single-location coffee shop created a logo for itself that bore striking resemblance to Starbucks’ well known green logo. The giant company came against the small business with awe-inspiring strength. Starbucks did not demand any punitive damages, but it did win an immediate end to the coffee shop’s entire campaign. The small business had invested a significant portion of its total revenues into that campaign, and of course lost it all.

Rented Vehicle Coverage

This provides protection for the business from mishaps that can occur in the use of leased vehicles, or with employee-owned vehicles that the employees are using for work purposes. This part of the business owner’s policy is for liability issues only. The business that also wants physical coverage for vehicle damage must also purchase a business auto policy.

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Equipment Breakdown Coverage

Regardless of the type of equipment, if it is necessary for conducting business but is damaged by a power surge, mechanical breakdown or even operator error, this aspect of the business owner’s policy insures against resulting loss.

The Bottom Line

So who needs business owner’s insurance? The short answer is, everyone who owns a business. There is a host of other reasons that a business might need insurance. Businesses can be insured against virtually every negative aspect of business other than declining sales or poor marketing. The cost of that insurance is the point that needs to be weighed. Business insurance can lessen the risk of property damage or liability lawsuits, and others that business owners can find themselves faced with.

Balancing Risks and Insurance

Business owners must be prudent in the items they insure their businesses for. They also must ensure that they negotiate or receive the best prices possible for the coverage they decide that they need. Competent insuranceagents focused on the customer’s needs will make sound recommendations, but that competence also may come with a price attached.

Bussines risk

Certainly, any business owner can research types of business insurance online, make choices and purchase a policy. Such an approach is likely to provide selected insurance at a lower overall rate, but it also may leave the business or business owner unprotected in areas that the business owner fails to consider. The business owner’s policy protects the business against such gaps in coverage.

Any business owner can and should research online options, as well as seek several price comparisons. Business owners are cognizant of the time that business requires, and many are reluctant to claim an agent’s time simply for the purpose of making comparisons between policies and prices.

Interviewing several insurance companies and requiring that they demonstrate the superiority of their insurance products is appropriate near the end of the process, but there are other options early in the vetting process. One of those is to research industry norms online. One company offers insurance recommendations based on the type of business to be insured. It offers checklists for an array of business activities ranging from candy shops to funeral homes to photo studios to restaurants to architects offices to veterinarians and many more retail, professional or wholesale pursuits.

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What to Look For

For most businesses in today’s difficult economy, the ultimate deciding factor in the realm of preferences will be the cost of coverage. Comparing costs is imperative. There are some types of insurance that are crucial to specific types of businesses. As example, every grocery store needs wet floor insurance backup, but the same type of coverage would be ludicrous for an architectural services firm.

A business owner’s policy can be equally appropriate for both types of businesses. The BOP adapts to the needs of the business, rather than the business adapting to the processes and requirements of the insurer.

Business owners need to ensure that they are receiving valid insurance advice from a source that has the business’ best interests at heart, and then work from that point. Arriving at the “must have” list and determining that cost allows the business owner to expand to other types of insurance. Every business owner needs a business owner’s policy, however. Business is hard enough in the current economy.

There is no excuse in allowing an insurable event to end the business’ life. Comparing prices ensures that any business owner secures the best possible price for the insurance protection that the business needs.