What does a business owner’s policy cover?
There are primarily two types of coverages included in a business owner’s policy:
- General liability insurance
- Commercial property insurance, also known as business property insurance
Each carrier has its own unique twist on BOP. Sometimes carriers will include business interruption insurance, cyber insurance, or another add-on depending on the business’ industry. That makes it even more important to reach out to one of our licensed agents to help navigate which carrier is the best fit for your coverage requirements.
General liability insurance covers third-party accidents resulting from your business operations, such as injury, property damage, advertising injury, and legal costs to defend against lawsuits. For example, if an employee incorrectly replaces a faucet and water leakage damages a customer’s property, general liability coverage will help pay for the expense to replace the customer’s water-damaged property.
This is one of the most common types of business insurance that most companies should have. It’s very rare that a business won’t interact with customers, which means there’s a chance for accidents and claims to occur.
Commercial property insurance covers the cost to repair or replace business property that is stolen, damaged, or permanently destroyed, within the terms and conditions of the policy. This includes owned commercial spaces, equipment, inventory, electronic data, and personal effects. For example, if there’s a leak in your office building over the weekend and it damages laptops beyond repair, commercial property insurance will compensate your business for the property damage.
Part of commercial property insurance is often business interruption insurance, and this protects your business against unexpected closures that result in loss of revenue. It helps cover events like a pipe bursting that forces you to shut down while repairs are made.
Working locations vary, but most businesses operate from some commercial location. This makes commercial property insurance a must for many small businesses.
Business owner’s policies are meant to be flexible. Depending on which insurance carrier you decide to use, a BOP bundles different insurance offerings for a customized solution that fits your operational requirements. Some common add-ons are cyber liability insurance and errors and omissions insurance.
What does a business owner’s policy NOT cover?
What a business owner’s policy does not cover will vary greatly, depending on any additional packaged policies. In general, a BOP will not cover:
A BOP will not cover any expenses related to claims of inadequate work delivered or performed for a client. Some carriers offer limited coverage for professional liability as a BOP endorsement. However, this exposure is best covered under errors and omissions insurance.
While BOP includes general liability which covers third-party injuries, it will not cover employee injuries. Injuries to employees that are sustained within the course and scope of their work duties are only included in workers’ compensation insurance policies.
Employment practices liability
If an employee files a discrimination, harassment, wrongful termination, or hiring claim, your company will need to have employment practices liability insurance (EPLI). A BOP will not cover claims due to harassment, wrongful termination, or discrimination lawsuits or settlements.
Natural disaster property damage is a common BOP exclusion. Unless you add additional coverage options, a BOP typically does not cover commercial damage from floods or earthquakes.