Anyone who owns a business, whether it is an office, storefront, warehouse or a home based business, has certain risks to be aware of the minute they open for business. Every customer, client, prospect, employee or even former customer can be a potential lawsuit waiting to happen. Most everyone has heard of the McDonald’s scalding coffee lawsuit where the claimant won a significant settlement.  

Most people think of slip and fall claims, but there are many other risks presented to the business owner that must be mitigated. Any property that is owned by the business is subject to damage from various perils such as fire, windstorm, lighting strike or burglary. The most common and economical way to mitigate these risks is by purchasing a Business Owner’s Policy (BOP) from a reputable insurance company. A typical BOP is going to be a package deal: 

  • Property coverage (building) 
  • Business Personal Property coverage (your stuff inside your business) 
  • Liability coverage 
  • Business interruption coverage 
  • Employer Practices Liability coverage 
  • Equipment breakdown 
  • Property of others 
  • Many more by way of endorsement 

The Business Owner’s Policy is similar to a homeowner’s policy in the way it delivers comprehensive coverage in a packaged deal. And, similar to a homeowner’s policy, it can be endorsed to offer additional coverages that are particular to your type of business. Purchasing the appropriate limits of liability may also depend on your type of business and the number of customers you service. However, skimping on this coverage can lead to financial devastation. In most cases, the business owner has put up significant capital to start their business so why take the chance of losing everything when you can transfer the risk to an insurance company. The price difference between $300,000 liability coverage and $1 million is not that great so you should always consider buying as much as you can afford.  

Although the BOP is considered a comprehensive business insurance policy, there are some coverage gaps and limitations that the business owner should be aware of:

Employment Practices Liability (EPLI)

Although some BOP policies do offer EPLI, they typically offer it with a reduced limit which may prove to be insufficient after a loss. EPLI is becoming more and more important for both small and large employers as employees learn about actions that can be pursued from heavy advertising by law firms.

Professional Liability (E&O)

Also referred to as malpractice insurance, Professional Liability provides coverage to companies and individual who provide professional services and advice to their clients. Professionals who receive payment for services and advice are typically held to a high standard by their client and the legal system which may license them. The Professional Liability Policy provides coverage for defense costs, settlement fees, and financial judgments awarded by the court.

Product Liability Insurance

Product Liability coverage is generally excluded on the BOP policy. This coverage is designed to protect businesses that manufacture and/or sell products. This type of coverage is ordinarily purchased as a monoline (single item) policy. It is especially needed for any business that manufactures and sells food products, but whether your product originates from your business or elsewhere, it's important to have this coverage in place in the event of a product liability claim which in many cases can lead to class-action status.

Although BOP policies accomplish much of their intended goals, a BOP is not a one-size-fits-all form, but must be monitored and customized to meet the specific needs of the insured.