While no one enjoys shopping for or paying for insurance, insurance is the most efficient way to finance a business’s risk with minimal costs. Furthermore, small businesses face specific challenges that larger corporations might not face when they decide on their annual insurance policy.
While larger corporations need master property policies with dozens of locations and warehouses, small businesses often have one location that they lease, not own. Larger corporations need an extensive general liability and umbrella insurance policy, but small businesses often only need $1,000,000 to $2,000,000 in limits. A larger company could absorb a few thousand dollars in losses or deductibles, while small businesses often have a tighter cash flow and need to minimize the risk of unexpected expenses.
Because of these specific needs, insurance companies often provide a specialized policy form called the Business Owners’ Policy (BOP). This type of policy combines the two main lines of insurance that most small businesses need, adds some specialized, miscellaneous coverages, and packages the costs in one streamlined premium.
For example, think of the local dry cleaner. The owner needs basic general liability limits, coverage for his business’s equipment (personal business property), and coverage for his customers’ clothes while they are in his care, custody, and control (bailee’s coverage). Instead of purchasing three separate policies, the small business owner can buy one streamlined BOP that addresses all three major exposures for a lower overall price.
Another example is the local hair salon. The owner needs basic general liability, professional liability, and some coverage for the business’s equipment (personal business property). Like the dry cleaner, many carriers have created a customized BOP format to address all three exposures in one simple policy.
A final example is a local consultant who leases out an office and provides professional services to the community. He will need general liability, professional liability, and some building contents (personal business property) coverage. A Business Owners’ Policy can wrap all required coverages into one package and provide the best solution for this local business.
As one can see, the major exposures that a local business will face are these: property (building and personal business property) and liability (general and/or professional). The Business Owners’ Policy packages these major exposures with some additional, miscellaneous coverages (outdoor signs, valuable papers, and records, business income, etc.) to provide an all-in-one solution for the local business.
At Wallace Welch & Willingham, we provide many Business Owners’ Policies for the clients in our Small Business Division. Please feel free to reach out with any questions!