As a new business owner, knowing what insurance coverages you need for your business can be overwhelming. There are a lot of different factors to consider when assessing your business operations and the exposures you face. This article covers some of the key new business insurance coverages you should consider and how they can help.
What is a BOP?
A BOP is a business owner’s policy. Designed specifically for small and mid-sized businesses, a business owners’ policy combines routine coverages needed for “main-street businesses.” It is a very popular option for startups and small businesses seeking a comprehensive new business insurance policy. A typical BOP will include:
- General liability insurance
- Commercial property insurance, including business income insurance
Outside of the two main coverages, a BOP will contain a list of additional coverages dependent on the carrier you choose. This is important because it allows you to customize your coverage package to suit the specific needs of your business. Let’s dive further into the two main coverages under a BOP, along with a few other coverages you may want to add.
General Liability Insurance
General liability insurance is one of the main lines of coverage that covers casualties. Casualties generally fall into two categories: bodily injury and property damage. A commercial general liability (CGL) policy typically includes three main coverage sections:
- Premises liability: Covers bodily injury and property damage from or on your business premises
- Product liability: Covers bodily injury and property damage that arises out of the use or consumption of your product
- Completed operations liability: Covers bodily injury and property damage that arises out of your completed work
One of the advantages with general liability coverage is that it is comprehensive. This means that your policy covers hazards listed within the insuring agreement that are not excluded. In addition, comprehensive coverage typically extends your protection to new locations or operations your business takes on during the policy period for a short period of time. As a new business owner, CGL coverage is one of the most basic forms of new business insurance coverage you can get to protect your business.
Commercial Property Insurance
Commercial property insurance covers two tangible coverage items:
- Buildings
- Business Personal Property
Building coverage will cover buildings and subsequent additions listed on the declarations of your insurance form. These buildings will normally be listed at replacement cost value, and your limits will likely reflect that valuation.
Business personal property coverage includes any property not permanently attached that is used in the course of your business. This can include items such as furniture, machinery, equipment and inventory.
Business Income Insurance
Business income coverage is another vital component of a BOP policy. This part of the BOP provides coverage for income lost as a result of a covered cause of loss listed on your insuring agreement.
Workers’ Compensation Insurance
While not part of a BOP, workers’ compensation should be considered. Workers’ compensation coverage can protect your employees in the course of their work duties. Workers’ compensation provides basic benefits to employees, including medical care, disability benefits and return-to-work benefits.
Workers’ compensation insurance is regulated on a state-wide level. This means that for some states, you are required to provide workers’ compensation coverage for your employees, while other states (like Texas) may not require coverage. Even if coverage is not required, you may want to purchase it because it affords some legal advantages.
Contact one of our specialists to discuss whether you are required to carry workers’ compensation coverage in your state and how else it can protect your employees.
Commercial Auto Coverage
Other than a possible Hired + Non-Owned endorsement, commercial auto coverage is not a part of your typical BOP and therefore must be purchased separately. A standard commercial auto coverage form can cover autos including cars, trailers, trucks, vans or any other vehicle designed for use on public roads.
The most comprehensive commercial auto insurance option covers “any auto” where available, which includes liability arising out of the autos listed on your auto coverage policy.
Professional Liability Coverage
Also known as errors and omissions coverage, professional liability coverage is a special coverage option for those who provide services that could result in financial loss for their clients.
Designed to protect professionals such as accountants, insurance agents, financial advisors, real estate professionals, advertising agencies, architects, engineers, lawyers and more, this coverage option protects these professionals from liability arising out of the errors and omissions from their services.
Some minor exposures may be eligible to have professional coverage on a BOP, for most, a separate policy will be required. With some exceptions, professional liability coverage is unique in that it covers the economic and financial loss of the third parties affected. This is opposed to covering property damage and bodily injury claims, which fall under the scope of a general liability policy in most cases.
Cyber Coverage
Some BOPs provide minimal data corruption, if any. Stand alone cyber policies can offer more comprehensive coverage. Cybercrime has become commonplace – according to Coalition, business email compromise claims increased 51 percent in 2021, while funds transfer fraud increased 28 percent. Most of the burden of these losses has fallen on small businesses.
Cyber insurance coverage is among the most important new business insurance coverages you should consider. As businesses become increasingly digitized by relying on digital transactions and data storage, the occurrence of cyberattacks has become an increasingly common threat.
A cyber insurance policy may cover:
- Data breach
- Cyberattacks on internal and external data
- Terrorist acts
- International cyber attacks
It’s important to consider both first-party and third-party coverage for cyber insurance. While first-party coverage will protect your business costs while you recover from an attack, third-party coverage will protect your business from liability alleged by a claimant. A good cyber insurance policy can help your business facilitate damage control in the event of a cyber theft.
Start Your New Business Insurance Plan
Implementing the right new business insurance coverages for your business can be a critical step toward a successful new business launch.
Need guidance? Contact us today to explore your new business insurance options.
