Happiness is a BOP
Almost everyone knows about Homeowners and Personal Auto policies. The success with these policies spurred the development of a similar package policy: the Businessowners Policy (BOP). This policy is intended for main street businesses. The BOP combines building, personal property, and liability coverage with other attractive options. Every BOP package must have a set of Policy Conditions. We'll review those conditions later.
As mentioned before, the Insurance Services Office (ISO) forms are as close to a standard or benchmark policy as there is in the United States. The ISO also standardizes the BOP, although you may have a BOP with different provisions.
Are You Eligible for a BOP?
The two keys to BOP eligibility are type of business and square footage. General examples:
- apartment buildings
- office buildings
- buildings used primarily for mercantile, service or processing purposes
- mixed use, e.g., stores in an apartment building.
Square footage guidelines can relate to overall building space or a business's rental space. Generally, the cutoff for BOP eligibility is 25,000 square feet; however, this varies between insurance companies.
One Size Package Policy Fits All?
Fitting an insurance policy to a business depends on a number of factors. This includes which insurance companies are in the market for what types of risks and restrictions. While BOP's are fine packages of coverage, you haven't missed out if your business has a Commercial Package Policy (CPP). A CPP is the right coverage for many businesses. An insurance agent can determine whether your business is eligible for, and should have a BOP.
Business Personal Property Coverage
Business personal property coverage can include:
- a building owners' business personal property in an apartment building
- office business personal property
- business personal property for merchants, wholesalers, and service or processing organizations
- commercial condo unit owners.
When you own a building, the same BOP must cover both the building and the business personal property. Otherwise business personal property can be insured alone in a BOP. This is good for businesses that lease or rent space.
Different BOP Forms
The CPP has different causes of loss forms that provide different levels of coverage. The ISO BOP has a named peril form (Standard) and a Special peril form.
The BOP named peril form will:
- have coverage for a dozen or so perils such as fire, lightning, windstorm and hail, sprinkler leakage, and vandalism
- usually cost less.
The Special peril form will:
- have coverage for all risks of direct physical damage except as limited in the policy
- have broader coverage than one setting forth specific perils.
By nature, the Special form has more coverages built in. The Standard form has approximately a dozen additional coverages. Among these are:
- debris removal
- counterfeit money orders and paper currency
- increased cost of construction
- forgery exterior glass and lettering (this includes replacement and repair of items on the outside of the building, commonly advertising-related materials)
- collapse and water damage.
Don't worry, we're not ignoring loss of business income and extra expenses from a direct insured loss. Frequently a loss from a fire or other insured peril goes beyond the direct damage caused by the fire. Even minor damage can close your business for a long time. This means your business has no income to maintain salaries and other expenses. Don't ignore loss of income protection!
* Tip. Business interruption coverage is not a luxury.
Recall that extensions are an opportunity for you to have certain property covered after a loss. Extensions are controlled by:
- a limit on expendable dollar amounts
- an after-the-fact additional premium, or
- a territorial restriction.
The ISO BOP's make provisions for the following:
- newly acquired property
- personal property off-premises
- outdoor property personal effects (non business property)
- valuable papers and records
- collapse and water damage.
Coverage is limited in these areas. You may need specific insurance to cover one or more of these extension areas for your business.
Exclusions & Conditions
Exclusions and conditions are common in insurance policies. BOP's are no exception. You'll find some exclusions and conditions from policy to policy, regardless of the type of insurance. Conditions are normally procedural matters and loss adjustments. Exclusions are matters the insurance is not designed to cover.
Note. Remember an insurance policy must be read as a unit, not as independent paragraphs or sections.
A "one policy fits all" attitude will not work any more than one prescription for glasses works for every person. Our insurance needs are all different. Everyone has a different type of property, amount of property, location, ownership, and so on. Your prescription for insurance should closely reflect your risk of loss. That way you're not paying more premiums than necessary.