Business owner policies (BOPs)
Many insurance companies have bundled property and liability coverage into what's commonly called a business owners package policy (BOP). It allows you to obtain broad coverage with affordable premiums.
According to the Insurance Information Institute, BOP policies generally cover:
- Buildings or "declarations" named in the policy. Structures are covered as well as permanently installed fixtures, machinery and equipment; outdoor fixtures; items you use to maintain or service the building, such as appliances; and additions under construction. You can choose to insure your buildings at their "actual cash value" or their "replacement cost" depending upon your own personal needs.
- To keep up with the increasing cost of rebuilding, the policy's limit of insurance for covered buildings will automatically rise by a set percentage each year. Be sure to discuss with your agent whether you should purchase the standard building coverage or replacement cost coverage.
- Building contents, although there are a few exceptions. The policy covers most property on or near the business premises that is used in the business. This would include such things as machinery, computers, raw materials or inventory. You also have coverage for any leased property, which you are contractually obligated to insure.
- Property of others that is in your care, custody and control, to the extent you are legally liable for that property. This coverage is particularly important to a business, such as a computer-repair shop, that earns revenue from servicing the property of others.
Keep in mind that, according to III, small- to medium-sized businesses have to meet certain criteria to be eligible for BOP insurance. Factors include the size of your storefront or business office, required limits of liability and the amount of offsite activity, plus financial stability and security features.
Even if you have a BOP, you'll want to consider adding coverages that might not otherwise be included. For example, most BOP policies do not cover auto, workers compensation, or life, health and disability insurance.
Property insurance can be tailored to fit your needs since no two businesses are the same. This is why it's best to speak with an insurance agent who can help you determine the type of coverage that is best for your business.