A business owner needs to be prepared for any financial difficulty or a potential hazard that could lead to a significant loss for the organization. Buying the right type of insurance is crucial to ensure the financial safety of your store. One such insurance that bundles the three vital coverages into a single package is the BPO (Business Owner’s Policy). It combines business interruption insurance, general liability, and commercial property insurance into a single unit and is available for a comparatively lower premium than these individual insurance plans.
Note that while these insurance policies are sufficient to recover the income you have lost due to natural disasters or any event that resulted in the temporary closure of your business, you need additional insurance policies, such as workers’ compensation and commercial auto insurance. These are important if you own vehicles and have employees. BPO is a perfect choice for businesses with an annual income of less than $5 million and fewer than 100 employees.
Understanding Business Owner’s Policy
A Business Owner’s Policy is a combination of three major types of insurance policies that protect the business against liabilities. They include:
- General liability
- Business interruption
- Commercial property
That, however, doesn’t mean you have to settle for these three policies only. The bundle can include customized plans, such as liquor liability, for extra protection. The policy is perfect for small and mid-sized organizations, although not every company is eligible for BPO.
Also read: Who Needs Errors and Omissions Insurance?
Ideally, if you have a physical store and sell physical goods, you should consider applying for a business owner’s policy. It’s highly recommended for businesses working with heavy equipment and machinery. If your employees are supposed to handle this equipment and you allow public visitors on site, having BPO can save you from the medical expenses or legal claims you might experience due to any mishap in your brick-and-mortar store.
Three Elements of BPO
As mentioned previously, BPO covers different types of liabilities, including damage to your assets and properties, medical expenses you incur due to injury to your visitors or employees, and defending your business against any major lawsuit. Here are three common types of business insurance policies explained.
General Liability Insurance
Any physical injury, lawsuit, property damage, or copyright infringement will be covered by general liability insurance. The policy can also be used to reimburse the cost of medical expenses that your employee or any third party has to bear because of the bodily injuries they experienced in your brick-and-mortar store or while working with your heavy equipment.
Commercial Property Insurance
Commercial property insurance provides coverage for property damage. If the building where you have your office gets damaged due to a natural calamity or other possible causes covered by your commercial property insurance, you can seek reimbursement for the repair. Likewise, damage to your inventory or equipment will be covered by commercial property insurance.
Not only does it cover the damages that occur due to the inventory or equipment getting broken accidentally, but the policy also covers the cost of lost and stolen items. Whether you own the property where your business is or have leased it, it’s important to sign up for commercial property insurance to protect the property and your assets from any potential damage.
Business Interruption Insurance
Another common policy included in the BOP is business interruption insurance. The plan covers income you’ve lost due to the temporary closure of your business—whether it’s because of theft or a calamity that caused severe damage to your business’ property or an asset.
Also read: What is Business Interruption Insurance?
You can also claim business interruption insurance to recover the operational expenses you have incurred during the closure.
The insurance policy makes sense for small and large-scale companies that have to shut down for the reasons covered by your insurance policy. With this insurance, you can rest assured that the insurance provider will help you fulfill your obligations, whether it’s meeting operational expenses, like payroll, or recovering the lost revenue during the closure period.
What’s Excluded from the BPO?
While the insurance covers most aspects of damages to the property or people, there are certain exemptions you should be aware of before signing up. Here are a few:
- Workers’ Compensation: You need to buy a separate insurance policy for workers’ compensation. This should cover the cost of medical expenses they might incur if they encounter an accident or experience an illness.
- Professional Liability: Your business needs protection against customers’ claims, such as charges for negligence and other lawsuits. Whether you sell physical items or provide service, professional liability insurance is mandatory but is unfortunately not covered by business owners’ policy.
- An Auto Policy: You need a separate auto policy if you have vehicles that are used for delivering products to your customers or for other business purposes. BPO doesn’t cover accidents that occur from vehicle collisions or injuries that happen to your driver or a third party due to your vehicle.
- Flood and Earthquake Damage: If you have noticed, the standard business owners’ policy and all the policies that come bundled within this cover nearly all types of property damages that happen due to calamities, natural disasters, government-based regulations, and other factors. However, it doesn’t include damage that occurs due to earthquakes and floods. For that, there’s a separate insurance policy.
Cost of Business Owner’s Policy
The average cost of BPO is $57 a month. However, the cost varies depending on several factors, like construction companies and other businesses that are exposed to higher risk pay more in premiums as compared to a retail or grocery store.
The location of the business is also considered when calculating your BPO premium. A business located in a high-risk area or a place exposed to extreme and fluctuating weather will pay more. Likewise, a business that has claimed insurance multiple times in the past is regarded as high risk and is thus supposed to pay more in premiums.
That was all about BPO, who should get it, its coverage & exemptions, and cost. It’s advisable to get this policy as it bundles three crucial insurance plans into a single coverage and is available at a reasonable price.