Virtually all business owners understand the importance of purchasing insurance for their business. But most of them feel completely at loss when it comes to making the right choice from the long list of different types of insurance policies. And because they don’t have the time to educate themselves about the various options, they usually dismiss the idea of purchasing insurance, probably until a later time.

If you are one of such business owners, then you need to make a choice as soon as possible, as delay could be dangerous. At least, purchase a business owner’s policy (BOP), as it is one of the most important policies for protecting you and your business. Even if you don’t purchase any other, this type of insurance will provide the extensive coverage you need.

What is a Business Owner’s Policy?

A business owner’s policy is a special type of insurance package that comprises all the basic insurance coverage options that are required by a business. This package was developed to give owners of small- and medium-sized companies a cost-effective way to insure their businesses.

A typical business owner’s policy comprises property insurance, business interruption insurance, crime insurance, business liability insurance, and flood insurance. There are also many other options that can go into the business owners policy, depending on the needs of the business to be insured.

Bear in mind, however, that a business owner’s policy, no matter how comprehensive, will not cover every situation that your business may be in. For example, a typical BOP does not cover professional liability, disability insurance, health insurance, or workers’ compensation insurance. If you need coverage for any of these, you will have to purchase a stand-alone insurance package.

Components of a Business Owner’s Policy

The components of a typical business owner’s policy have been listed above. Now, let’s briefly discuss each of them in detail.

Business interruption insurance-: This component provides funds to a company if that company’s operations should cease for some reason. Such reasons include vandalism or burglary, natural disasters, and sudden breakdown or damage of key equipment. Most business interruption policies will provide coverage funds for up to a year for qualified losses, although coverage lengths may vary.

Crime insurance-: This type of insurance provides coverage for losses resulting from theft, fraud by employees, burglaries and other criminal activities that can cripple your business.

Business liability insurance-: This usually protects businesses from litigations that can arise when a customer sustains an injury or falls sick on the company’s property or as a direct result of an encounter with the company’s product or equipment. In addition, it provides coverage for copyright infringement lawsuits, slander, advertising injury, and damage to a customer’s property and more.

Commercial property insurance-: This component of a business owner’s policy is an extended coverage to protect a business’s property, inventory, and buildings.

In addition to the above, any type of extra coverage can be added to a business owner’s policy for an additional premium. This flexibility is one of the key advantages of the business owner’s policy. Examples of add-on insurance policies include the following:

  • Employee practices insurance
  • ID theft insurance
  • Data recovery and critical equipment coverage
  • Coverage for leased equipment or vehicles
  • Coverage for tools and building supplies
What factors determine business owner’s policy costs?

The cost of a business owner’s policy varies depending on a number of options. These include business type, industry, business size, products and services, risks, employee work duties, business property and assets, and add-on insurance policies.

To figure out how much you’re likely to pay in premium, find out what other businesses similar to yours are paying. Expert recommend gathering between four to six business owners quote so you can arrive at a near-accurate estimation of your insurance costs.

How to Purchase a Business Owner’s Policy

A business owner’s policy is totally different from personal insurance. Every business has its own risks, so it’s important that you contact an agent or insurance company with a lot of experience in insuring businesses like yours.

Before making your purchase, shop around. Find out about business owners policy from a number of insurance companies and how much each company charges as premium. In addition, read each company’s fine print to see if there are any unfriendly terms and conditions. Once you can find the lowest rate for good quality, feel free to go with that option.

Bottom line

You should now have a good understanding of business owner’s policy, what it covers, and how to go about buying from the right insurance company.

Ajaero Tony Martins