Many small business owners buy a type of insurance coverage called a Business Owner's Policy. This is a package policy that covers major property and liability exposures as well as a loss of income if your business cannot operate for a period of time.
For example, if your accounting firm's roof is damaged during a thunderstorm, causing your office to flood and your business to close for two months, a BOP would provide coverage in several ways.
The policy would cover the cost of repairing the roof, cleaning up water damage and repairing or replacing your furniture, computers and supplies. A BOP also would cover your payroll and taxes for the two months the business was closed. And if one of your clients was in your office during the storm and was injured by falling debris, a BOP would cover your customer's medical bills.
Buying a BOP can be a good deal for a business owner. The policies often provide more complete coverage at a lower price than separate policies would for each kind of coverage.
A BOP covers major property exposures, liability exposures and business interruption.
Property coverage generally includes owned or leased buildings; the contents of buildings, such as furniture, supplies, fixtures, machinery, equipment, inventory and building improvements; glass and signs; and some property off of the premises.
Property insurance can be bought based on the property's actual cash value (its replacement cost minus depreciation), its current replacement cost or another agreed-upon amount, such as an appraisal.
Liability insurance covers your business if it is sued for something the business did or failed to do that caused injury or property damage to someone else. Liability insurance covers damages and settlements stemming from a lawsuit, up to the policy limits. Many liability policies also cover attorneys' fees and other costs associated with defending against a lawsuit.
Business interruption coverage can pay for your business' fixed costs, such as rent, payroll and taxes, if your enterprise suffers a property loss that causes it to close or slow down for a period of time while repairs are made.
What Isn't Covered?
Usually a BOP doesn't cover damage due to earthquakes or floods; workers' compensation; group health, life or disability insurance; insurance for company-owned vehicles; and specialized liability risks such as professional liability, director's and officers, employment practices and malpractice.
What Affects the Cost of the Policy?
Insurers use rating formulas to determine the policy premium. For a BOP, insurers consider several factors, including the type and location of the business; the building's age, construction material and security features such as alarms and sprinklers; the business' claims history; and the business' financial stability and management team. Rates also vary depending on a policy's coverage limit.
At Winnsom; we want you to know about the insurance you are buying.