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Return To: Business Insurance – The Ultimate Guide
Business Owners Insurance is the necessary policy to protect your company from major property and liability risks. Whether your company suffers fire damage or legal damage from customers or employees, a business owners insurance policy helps cover your expenses.
Despite this protection, only 60% of small businesses across the US have insured their business, claiming that their personal insurance is sufficient. We are here to show you how a business owners’ insurance protects your company from major liability and property risks in ways that personal insurance policies cannot.
BOP Insurance Basics
A business owners’ policy (BOP) insurance package is a combination of your business needs’ primary protections. Standard risks that your business faces include business property and liability risks.
Standard insurance packages are ideal for small businesses that face a general same degree of risk. Larger companies have the option to expand their policy by getting extra coverages. Here are the basic coverages that a standard BOP insurance policy protects your business from:
General Liability Insurance
This policy is standard coverage in business insurance. General liability insurance policies protect your business from potential losses if you ever are guilty or liable for bodily injury or property damage or personal injury. Such liabilities include damages that either your employees, products, or services have caused.
General liability insurance policies cover non-professional negligent acts. The Insurance Information Institute has listed some instances that qualify as situations that your business may be liable for. General liability insurance policies can cover damages from cases similar to the following examples:
- A customer incurs an injury while they are in your premises. Perhaps the failure to provide a “wet floor” caution sign caused them to slip and fall. Your business is liable for personal injury.
- A neighbor’s home suffers water damage after an employee in your business left the water running. This negligence caused substantial property damage to a neighboring area, which they can sue your company for.
- Customers file a class action lawsuit against your company for misleading information and false advertising reasons.
Note that general liability protection insurance is limited. You may want to get commercial umbrella liability that provides extra protection for more specific liabilities that exceed a standard liability policy’s coverage.
Commercial Property Insurance
BOP policies cover commercial property insurance or the necessary protection you need for your business’s buildings and items. Your company would need protection from damages to properties that would affect your business operations. Commercial property insurance policies usually cover the following:
- Buildings: Commercial property insurance pays for damages that your company’s building may suffer due to hazards including floods and fires. This insurance policy also covers structures, fixtures, machines or equipment, and appliances necessary to maintain business operations. Insurers offer coverage either for these items’ actual cash value or their replacement costs.
- Building Contents: Commercial property insurance pays for potential damages that your company’s raw materials, inventory, and computers may suffer. Properties that your company leases also receive coverage, per contractual obligations for leased property insurance.
- Other People’s Property: If your business holds other people’s property, such as computer repair shops keeping their customers’ property for a certain time, then you are liable for their property. This insurance policy protects you from potential damages that your customers’ property may suffer.
Business Owners Insurance Extra Coverages
There are separate business owners’ insurance policies that you can get to cover other areas of your business. Examples of extra coverages include Commercial Auto Insurance to protect company vehicles and
Standard BOPs may not pay for optional coverages including employment practices liability, business interruption insurance, and cyber liability insurance. This lack of coverage means you must shop for separate policies to protect your business from the damages that these coverages pay for.
Employment Practices Liability
Employment Practices Liability (EPLI) protects your business against multiple lawsuits that employees may file against you including the following claims:
- Sexual Harassment: Employees can file sexual harassment claims against your company for failing to handle cases like unwelcome sexual advances, requests of sexual favors, or any verbal or physical conduct that is sexual.
- Discrimination: An employee who feels that you are treating them differently based on race, nationality, age, sex, or religion may file a lawsuit against your company for discrimination.
- Negligent Evaluation: An employee may file a case against your company after they receive performance evaluations that they assert are unfair and more negative than their actual performance.
Business Income Coverage
Business income coverage or business income interruption coverage helps your company remain in operation despite undergoing a restoration period. Business income interruption policies include the following coverages:
- Lost Net Income: Ongoing repairs, whether they are equipment repairs or building repairs, affect your company’s income. Your insurer bases your coverage for lost net income depending on your financial records.
- Mortgage, Rent, and Lease Payments: If your business is renting a place, and your reason for temporary closure does not affect your location, you must have a way to pay rent. Business income coverage helps cover rental fees while your company has limited income.
- Employee Payroll: When your company is temporarily closed, your employees are affected. Workers’ compensation insurance coverage helps pay for your employees’ lost income after your business suffered from temporary closure.
Learn Why Small Business Owners Need Business Income Insurance
Cyber Liability Insurance
Your business may need cyber liability insurance as extra coverage to pay for hardware and software repairs. Businesses use computers and digital software regardless of industry. You might store customer data on a computer, or you may rely on the internet to deliver your products or services. You need to protect your data from expensive data breach recovery fees or legal fees that result from failure to protect your customers’ private information.
The types of cyber liability insurance policies available to businesses are first-party cyber insurance and third-party cyber insurance. Here is a summary detailing each policy type’s coverage.
| First-Party Cyber Insurance | Third-Party Cyber Insurance |
| Covers the direct expenses that your business faces after a data breach.Pays for income losses from business interruptions that result from cybercrimes.Covers the amount of money that cyber extortionists demand.Pays for public relations fees, including expenses for notifying clients and employees about data breaches or other cybercrimes that your company suffered.Pays for reputation recovery fees that your company needs to save face after suffering from cybercrimes. | Covers the fees that result from cyber threats against your clients.Pays for necessary legal fees that you may face after clients sue you for failing to protect their sensitive and personal details.Pays for the expenses from negligence or breach of contract claims.Covers media liability claims including copyright infringement, defamation, slander, or libel.Pays for government or regulatory organization fines that your company must cover after a cybercrime. |
Conclusion
Business owners’ insurance combines the general property liabilities and personal injury liabilities into one business insurance package. This policy is designed to protect businesses from common risks they face, including physical injuries that occur on your premises, or repairs for equipment that your business relies on for operations.
Standard BOPs are suited for small- and medium-sized businesses that face similar risks. Larger businesses can apply for separate business policies that the basic policies do not cover, including cyber liability, lost income, and employment practices liabilities.
Business owners’ insurance costs vary depending on the protections your business ideally needs. Get a business owners’ insurance quote today for the liability and property damage protection your business needs.