A Risk Management Solution for Today’s Small Business Owner

Considering all the things that can go wrong with a business, small business owners may be considered risk takers. However, there are two risk exposures that any business owner can ill-afford to overlook: property loss due to perils such as fire, theft, wind or water damage, and liability loss for injuries sustained by individuals while on business premises and/or during operation of the business. Although self-insuring was once a popular option, in today’s litigious society, it is hardly cost-effective, particularly for potentially catastrophic losses. This is where a business owners policy (BOP) can play a crucial and beneficial role.

A BOP bundles prearranged property and liability coverages in one package. Thus, a BOP provides property coverage for a building and its contents, and losses of business income after an accident, as well as liability coverage for physical injury or physical damage caused by an employee. (Health insurance, workers compensation, and business automobile coverage are typically not included in the standard BOP.)

The main advantages of a packaged arrangement are ease of handling, streamlined rating procedures, and a reduced need for detailed risk management decisions. A BOP is typically less expensive than maintaining several policies.

Is a BOP Right for My Business?

Generally, specific criteria must be met in order to qualify for this type of policy. First, your business should be considered a “good” risk so that premiums can be priced attractively compared to individual exposure policies. For instance, a small neighborhood bookstore selling books on gardening may have an easier time obtaining a BOP than a company that is in the building demolition business (where accidents may be more likely to occur). Second, your business should have “ordinary” insurance needs without the potential for unusual liabilities. Again, a demolition company certainly has an unusual liability, which likely would negate otherwise standard coverage. A standard BOP that does not adequately meet the needs of a particular business may be customized to answer those specific needs, which often makes a BOP an appropriate choice for small mercantile and service businesses.

While every business is unique, many businesses are exposed to similar types of risk. If the risk exposures of your business are fairly common, you may want to explore the benefits of a BOP. Having most risks covered under one policy can prove to be a cost-effective risk management tool. For more information on BOPs, give us a call. One of our qualified insurance professionals will be happy to help you determine if a BOP is right for your business.

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