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For small businesses, BOPs are ideal because of their customization options, but business owners should be aware that they are not all-encompassing. — Getty Images/shapecharge

If you own a business, you should consider investing in a business owner’s policy (BOP), also known as an umbrella policy. An umbrella policy is an insurance policy specifically designed for businesses with fewer than 100 employees. BOPs provide crucial insurance coverage for a variety of scenarios and threats to your business.

Loretta Worters, spokesperson for the Insurance Information Institute, said having a BOP in place simply makes good financial sense.

BOPs offer the core insurance coverages that most small businesses need in a single, convenient package, she said.

These coverages typically include:

  • Property insurance, for your building or office space, as well as personal property you own or lease (e.g., office furniture, equipment, inventory)
  • Liability insurance, in case you, your employees or your products cause harm in services provided that may lead to bodily injury or property damage
  • Business interruption insurance, which replaces lost revenue due to a covered peril

“The best way to think of a BOP is like a bundled value plan or value meal of coverage. You can certainly obtain these necessary coverages through individual policies, but bundling together different coverage types into one package that can be purchased as one unit can save you time and money,” said Joel Ohman, certified financial planner and founder of “Streamlined underwriting, efficiencies in sales and marketing dollars and other factors can yield you a discount versus purchasing coverage individually.”

Optional BOP coverage

There are additional coverages that can be added to your BOP, aside from the ones listed above. These include:

  • Auto liability, for hired and non-owned drivers, that covers bodily injury and property damage caused by a vehicle used for your business
  • Data breach insurance, in case your clients’ personally identifiable information is stolen
  • Employee dishonesty, to protect against employee theft of money, securities or property
  • Employment practices liability, to cover employment-related claims resulting from alleged or actual acts of discrimination, harassment, retaliation and other scenarios

“You can also increase your liability protection by adding what’s called an umbrella insurance policy, which boosts your coverage beyond the liability limits of your BOP and other primary insurance policies,” added Worters.

Verify that the insurance you purchase is what you need for your specific business.

Julie Jakubek, agency owner, Allstate

Avoid these mistakes

Many small business owners fail to explore a BOP because they presume it will be too expensive.

“Actually, a low-risk business often pays as little as $250 to around $1,000 a year,” noted Julie Jakubek, owner of an Allstate agency. “This premium commonly provides $1 million in liability coverage—the minimum recommended. And it covers business property in the amount of coverage needed to replace your business contents as well as lost wages in the amount you’ll need to continue your business for 12 months.”

Be careful, however; a BOP is not all-encompassing. It won’t protect you from errors, omissions or malpractice claims—for which you need a professional liability policy. It doesn’t include flood or business vehicle insurance, or provide coverage for worker’s compensation or disability. And some enterprises, like restaurants, may be ineligible for a BOP because of specific risks inherent in the operations. For these and other reasons, count on shopping around carefully for a BOP.

[For more on the various types of business insurance, see: A Guide to Choosing the Best Business Insurance.]

“If your business is very niche and has many unique risks, purchasing a BOP may not be your best choice. You may need different specific policies that an experienced agent can explain to you,” said Ohman.

Finally, avoid the mistake of having your business rated incorrectly on your BOP, which can lead to a denial of coverage for a claim and result in you resolving the problem out of pocket.

“Verify that the insurance you purchase is what you need for your specific business. For example, if your business primarily trims large trees, you should be categorized as a tree trimmer and not just a landscaper,” cautioned Jakubek.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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