How One Policy Can Help Cover Common Small Business Risks
Running a small business comes with a lot of responsibility. You may be thinking about customers, employees, rent, inventory, equipment, payroll, contracts, marketing, and the everyday work it takes to keep things moving.
Insurance may not be the most exciting part of owning a business, but it is one of the most important things to understand.
One option many small business owners hear about is a business owner’s policy. This type of policy is often designed to bring common business coverages together into one package.
So, what does a business owner’s policy cover?
The answer depends on the policy and the business, but it commonly includes general liability, business property, and business income coverage.
What Is a Business Owner’s Policy?
A business owner’s policy, often called a BOP, is a type of insurance package for small businesses.
Instead of buying every coverage separately, a business owner’s policy may combine several common coverages into one policy. This can make it easier for certain businesses to get basic protection for liability claims, business property, and lost income after a covered loss.
Not every business qualifies for a business owner’s policy, and not every policy includes the same coverage. Your industry, location, size, revenue, property, and risk level can all affect whether this type of policy is a good fit.
General Liability Coverage
General liability is one of the main parts of many business owner’s policies.
This coverage may help protect your business if someone claims your business caused bodily injury, property damage, or certain personal and advertising injuries.
For example, general liability may come into play if:
- A customer slips and falls inside your business
- Your business accidentally damages someone else’s property
- A client claims your work caused property damage
- Your business is named in certain lawsuits
- You need help with covered legal defense costs
General liability does not cover every situation, but it is one of the most common coverages small businesses need.
Business Property Coverage
Business property coverage may help protect the physical items your business owns or uses.
This may include things like:
- Furniture
- Equipment
- Computers
- Inventory
- Supplies
- Tools
- Fixtures
- Displays
- Machinery
- Products
- Office equipment
If your business property is damaged or stolen because of a covered loss, this part of the policy may help with repair or replacement, depending on your coverage.
This can be important whether you own a storefront, lease an office, operate a salon, run a retail shop, work from a studio, or keep business equipment at a physical location.
Your landlord’s insurance usually does not cover your business property. If you lease a space, your landlord may insure the building, but your inventory, furniture, supplies, and equipment are usually your responsibility.
Business Income Coverage
Business income coverage may help if your business has to temporarily close because of a covered loss.
For example, if a fire damages your shop and you cannot operate for a period of time, business income coverage may help replace lost income or cover certain continuing expenses while repairs are being made.
This can matter because bills may not stop just because your business is temporarily closed. You may still have rent, payroll, loan payments, utilities, or other expenses.
Business income coverage can be especially important for businesses that rely on a physical location to serve customers.
What Types of Businesses May Need a Business Owner’s Policy?
A business owner’s policy may be a good fit for many small or lower-risk businesses.
This may include:
- Retail stores
- Offices
- Salons
- Studios
- Boutiques
- Consultants
- Small restaurants or cafes
- Professional service businesses
- Home-based businesses
- Photographers
- Cleaning businesses
- Local service providers
The right coverage depends on the business. A small office may have very different needs than a restaurant, contractor, salon, or retail store.
That is why it is important to review your actual operations instead of choosing a policy based only on the name of your business.
What Does a Business Owner’s Policy Not Cover?
A business owner’s policy can be helpful, but it does not cover everything.
Depending on your business, you may still need separate coverage for:
- Workers’ compensation
- Commercial auto insurance
- Professional liability
- Cyber liability
- Employment practices liability
- Flood insurance
- Special equipment coverage
- Tools and equipment that travel
- Liquor liability
- Certain industry-specific risks
- Health or disability insurance
- Employee benefits
For example, if your business owns vehicles or uses personal vehicles for work, you may need commercial auto coverage. If you give professional advice or provide specialized services, you may need professional liability. If you have employees, workers’ compensation may need to be reviewed.
A business owner’s policy can be a strong starting point, but it is not a complete solution for every business.
Business Owner’s Policy vs. General Liability
General liability is one part of many business owner’s policies, but it is not the same thing as a business owner’s policy.
A general liability policy mainly focuses on third-party claims, such as customer injuries or damage your business causes to someone else’s property.
A business owner’s policy usually includes general liability plus business property coverage and often business income coverage.
So, if you only have general liability, your own business property may not be protected. If your equipment, furniture, or inventory is damaged or stolen, general liability may not be the policy that responds.
Business Owner’s Policy vs. Commercial Property Insurance
Commercial property insurance helps protect business property, but it does not usually cover liability claims by itself.
A business owner’s policy may combine commercial property coverage with general liability coverage. This can be useful for small businesses that need both.
For example, a boutique may need protection for inventory and displays, but it may also need liability coverage in case a customer is injured in the store. A business owner’s policy may help address both needs in one policy.
Does a Business Owner’s Policy Cover Tools and Equipment?
It may cover some business property, but tools and equipment need to be reviewed carefully.
If your tools and equipment stay at your business location, they may be covered under business property coverage, depending on the policy.
If your tools travel in a truck, trailer, or between job sites, you may need separate tools and equipment coverage or inland marine coverage.
This is especially important for contractors, photographers, mobile service businesses, landscapers, and anyone who brings equipment to different locations.
Do not assume tools are covered everywhere just because you have a business owner’s policy.
Does a Business Owner’s Policy Cover a Leased Business Space?
A business owner’s policy may help cover your business property inside a leased space and may provide liability coverage required by your lease.
However, your lease may have specific insurance requirements. It may require certain liability limits, a certificate of insurance, additional insured wording, or other coverage terms.
Before signing a commercial lease, send the insurance section to your agent. They can help you review whether a business owner’s policy meets the lease requirements or whether additional coverage is needed.
Does a Business Owner’s Policy Cover Employees?
A business owner’s policy may help protect the business in certain ways, but it is not the same as workers’ compensation.
If you have employees, workers’ compensation coverage may need to be reviewed separately. This coverage is designed to help with work-related injuries or illnesses for employees, depending on the situation and applicable requirements.
A business owner’s policy also may not cover employment-related claims, such as wrongful termination, harassment, or discrimination. Those may require employment practices liability coverage.
Does a Business Owner’s Policy Cover Professional Mistakes?
Usually, a business owner’s policy is not the same as professional liability insurance.
If your business gives advice, provides professional services, creates plans, makes recommendations, or can be accused of making an error that causes financial harm, you may need professional liability coverage.
This can apply to consultants, marketing professionals, accountants, real estate professionals, designers, beauty professionals, and many other service-based businesses.
General liability may help with bodily injury or property damage claims, but professional liability is meant for a different type of risk.
Does a Business Owner’s Policy Cover Cyber Claims?
Not always.
If your business stores customer information, accepts online payments, uses booking software, keeps digital records, or relies on email and online accounts, cyber coverage may be worth reviewing.
A business owner’s policy may offer limited cyber coverage or allow it to be added, but it should not be assumed.
Cyber risks can affect businesses of all sizes, not just large companies.
Why a Business Owner’s Policy Can Be Helpful
A business owner’s policy can be helpful because it may combine several important coverages in one place.
For many small businesses, this can make coverage easier to manage. It can also help make sure the business is not only thinking about liability, but also the physical property and income it depends on.
A business owner’s policy may also help meet basic insurance requirements for landlords, clients, or contracts.
However, the policy still needs to match the business. A policy that works for one business may not be enough for another.
When to Review Your Business Insurance
You should review your business insurance when your business changes.
This may include:
- Opening a new location
- Signing a lease
- Buying equipment
- Adding inventory
- Hiring employees
- Using vehicles for work
- Offering new services
- Taking on larger clients
- Working off-site
- Adding online sales
- Storing customer information
- Increasing revenue
- Receiving contract insurance requirements
Your insurance should keep up with the way your business actually operates.
If your business has changed since your policy was first written, it may be time for a review.
Questions to Ask Your Agent
Before choosing a business owner’s policy, ask:
- What does this policy cover?
- What is excluded?
- Does it include general liability?
- Does it include business property coverage?
- Does it include business income coverage?
- Are my tools and equipment covered?
- Are my inventory and supplies covered?
- Does this meet my lease requirements?
- Do I need commercial auto insurance?
- Do I need workers’ compensation?
- Do I need professional liability?
- Do I need cyber coverage?
- Are my coverage limits high enough?
These questions can help you better understand whether a business owner’s policy fits your business.
Need Help Reviewing Business Insurance Options?
At Foundation Insurance & Risk Management, we help Oklahoma business owners understand what coverage may fit their business and where gaps may exist.
A business owner’s policy can be a helpful option for many small businesses, but it is not one-size-fits-all. Your coverage should match your location, property, operations, employees, vehicles, contracts, and the risks your business actually faces.
If you have questions about business insurance or want to know whether a business owner’s policy makes sense for your business, contact Foundation Insurance in Guthrie, Oklahoma. We would be happy to help you review your options.
Frequently Asked Questions About Business Owner’s Policies
What does a business owner’s policy usually include?
A business owner’s policy commonly includes general liability, business property, and business income coverage. Exact coverage depends on the policy and business.
Is a business owner’s policy the same as general liability?
No. General liability is usually one part of a business owner’s policy. A business owner’s policy may also include property and business income coverage.
Does a business owner’s policy cover employees?
A business owner’s policy is not the same as workers’ compensation. If you have employees, workers’ compensation coverage should be reviewed separately.
Does a business owner’s policy cover business vehicles?
Usually, commercial auto insurance is separate. If your business owns vehicles or uses vehicles for work, talk with your agent about commercial auto coverage.
Who should consider a business owner’s policy?
Small business owners with business property, customer traffic, leased space, equipment, inventory, or liability concerns may want to review whether a business owner’s policy is a good fit.