As with Homeowner’s Insurance, we favor standardized forms as the basis for comparison. The form which provides the small to medium sized businesses the best combination of coverage and lower overall cost is referred to as a Business Owner’s Policy (BOP).
BOP’s are specially designed to provide a customized set of insurance coverages by the type of business to be insured. Package policy customization minimizes potential coverage gaps and costly duplications.
The BOP policy contains your property and general liability insurance. Additionally, there are a set of coverages specially designed for your type of business usually is provided at a minimal cost. Also, there are several specialized coverages provided on a limited basis to all BOP policy holders (i.e. crime, employee dishonesty, money and securities).
When comparing the BOP policy to other insurance programs, the most significant ancillary benefit is the business income coverage, which is normally provided at no additional cost. Most other insurance programs change an additional premium for potentially inadequate coverage.
Unlike other programs, the BOP Business Income coverage is provided on a 12 month actual loss sustained basis (for covered property losses), without having serious potential coinsurance or inadequate monthly limitations. Having the proper amount of business income coverage is critically important for location type businesses which include retailers, restaurants, real estate, auto repair, printers, wholesalers/distributors and manufacturers.
Two optional coverages we strongly recommend are hired/non-owned auto and employee benefit liability. That is because they are reasonable priced and practically every business has that exposure. Other optional property coverages you should consider include manufacturer/stock selling price, building ordinance, custom goods (bailee), pollution/contamination, mechanical breakdown, transit, scheduled glass, back up of sewers and drains.
When reviewing the other coverages included, be sure the amount of valuable records/papers, computer, transit, employee dishonesty money and securities. Also, review specialized coverages as they pertain to your business; enhance coverage to your special requirements.
Several other coverages are available as endorsements or only on separate policies. These include worker’s compensation, scheduled business auotmobiles, pollution, flood, earthquake, liquor liability and employment practices.
Here is the procedure we recommend you follow:
- Obtain the services of a professional insurance advisor who is both licensed and certified. Be sure the advisor specializes in offering programs for your type of business. You should require the advisor to provide references and contact the references to verify quality of service and level of expertise.
- Determine if your type of business is eligible for a BOP, and use the set of coverages as your basis for comparison. If not available, the assistance of a business insurance specialist is imperative.
- While reviewing what is covered, it is equally important to determine what is not covered or subject to limitations (i.e. earthquake and flood.)
- Depending on the type of business you own, you will need specialized coverages. If your business is location oriented, pay particular attention to your business income/extra expense coverage. Be especially careful if you are under a coinsurance type form as you may be subject to underinsurance penalties.
- If you are not a location oriented type business such as artisan (trades) or service type contractor, the premier BOP usually provides specialized coverage for contractor tools, installation, machinery and equipment breakdown. It is vital to review the individual limits and adjust them according to your specific business needs.
- As stated earlier, two optional coverages you should add are hired/non-owned auto and employment benefit liability. They are inexpensive and practically every business has this exposure.
- If it becomes necessary to take legal action, it’s best to hire an insurance expert witness to help you with your claim.