Mar202020

One option available to small businesses seeking an all-encompassing policy that packages property and liability coverage into one is the business owner’s policy ― also known as the BOP.

These policies are designed to simplify risk management for small to mid-sized businesses and are generally a good bet for providing the greatest amount of coverage and the least amount of work. Over the years since they were first introduced in 1976, BOPs have evolved by including coverage extensions depending on the needs and nature of the policyholder’s business.

Despite this evolution, however, and the general assumption that BOPs provide truly comprehensive coverage, there are some gaps that could catch you by surprise. There are ways to mitigate some of these gaps by purchasing additional insurance, but if you are aware of a BOP’s limitations at least you won’t be caught off-guard.

Typical BOP coverage

This article focuses on the typical Insurance Services Office BOP form, and some carriers have created their own with different coverages and limits. First, let’s look at what the typical BOP covers:

  1. Property insurance (covering buildings, equipment and inventory).
  2. Business interruption insurance (covering losses that cause you to shut operations or reduce production for a time). Business interruption insurance can provide funds to offset lost profits or to pay continuing expenses (typically for up to a year for insured losses).
  3. Casualty or liability protection (covering harm done by employees or products to other people or their property).
  4. Crime insurance (covering loss of money or securities resulting from burglaries or robberies or destruction), as well as losses from employee theft or embezzlement.
  5. Liability insurance covering lawsuits arising from accidents (as when someone trips and falls on your business’s property), or when you sell a product that damages the customer’s property or you are accused of offenses such as slander, copyright or invasion of privacy.
  6. Vehicle coverage for rented or borrowed vehicles.

 

The main BOP gaps

Business income protection in a BOP is reasonably extensive for loss of income after an event such as a fire, as the policyholder is fully covered for the period it is closed during restoration, for up to 12 months. However, there are five main gaps in a BOP:

Payroll protection ― A BOP policy will only cover payroll of “ordinary” employees for 60 days, unlike a standard business income policy. Ordinary employees are all of your staff excluding officers, executives, department managers and contract employees, among others.

If you want to extend payroll coverage for your ordinary employees beyond that, you have to purchase an endorsement for the additional period you want. Payroll for non-ordinary employees, as listed above, is covered for the entire period of your business’s restoration up to the 12-month maximum.

Restoration period ― The period of restoration, during which the policy will cover your business income, is limited to 12 months, and that time can pass quickly when you consider everything that may need to be done to return your firm to “operational capability.” It’s at that point that business income loss coverage ceases.

Consider that if your business burns to the ground, you will need to draw up new building plans, obtain building permits and make sure your new building is up to code. You also have to factor in the time it will take to rebuild the structure. If all of this takes longer than 12 months, business income loss coverage ceases. The policy will not extend protection beyond this period.

By the way, “operational capability” for the purposes of business income means that the company is operating at or near pre-loss production or sales capacity. It does not mean bringing the business income back to pre-loss levels.

Extended business income ― The BOP will pay for lost income for an additional 30 days after the firm has reopened for business. In many cases, this amount of time will not be enough to bring your business income back to the same level as before the incident. You can purchase a policy extension for this coverage.

Seasonal increase limitations ― One of the benefits of a BOP is that it will cover loss of business income in periods of seasonal increases. The standard increase limit is 25% for business personal property. The typical limit most small business purchase is $100,000, but that does not automatically mean that the policy will cover up to $125,000 during the business’s peak months.

That’s because BOPs state that the business personal property limit must equal 100% of the average monthly values on hand for the 12 months preceding the loss. In other words, it takes into account the seasonal increases from the year before.

Here’s an example of how the seasonal increase limit may yield the claims payment short of expectations: Randy’s Raft Rental, which carries $100,000 in coverage, experiences an uptick in business in June, July and August. While it enjoys revenues of $100,000 a month in the nine other months, during the peak period revenue jumps to $125,000 per month.

To qualify for receiving the seasonal increase to ensure it is covered for the full $125,000 during the peak season, policy limits would have to be increased to $106,250 (the sum of 9 months x $100,000 + 3 months x $125,000, divided by 12). If you are confused, we can explain.

Electrical damage/system breakdown

Typical BOP policies specifically exclude losses caused by systems breakdowns, or damage from electrical or steam boiler problems. If you want this coverage, you can pick up the “Equipment Breakdown Protection Coverage” endorsement.

Nils Wright
Author: Nils Wright

82 Comments

  2. Hello, Neat post. There’s a problem along
    with your website in internet explorer, might test this?
    IE still is the marketplace leader and a big element of people will
    leave out your magnificent writing because of this
    problem.

  4. I’m not sure exactly why but this weblog is loading very slow for me.
    Is anyone else having this problem or is it a issue on my end?
    I’ll check back later on and see if the problem still exists.

  6. An outstanding share! I’ve just forwarded this onto
    a co-worker who has been doing a little research on this. And he actually
    ordered me breakfast because I discovered it for him… lol.
    So let me reword this…. Thanks for the meal!! But yeah, thanx for spending the
    time to discuss this matter here on your web site.

  7. We are a group of volunteers and starting a new
    scheme in our community. Your web site provided us with valuable information to work on. You
    have done an impressive job and our whole community will be grateful to you.

  9. I think that is among the so much important information for me.
    And i’m happy reading your article. However should remark on few general issues, The site style is wonderful, the articles
    is truly great : D. Excellent process, cheers

  10. Nexium Canada Compare No Prescription [url=https://cheapcialisll.com/]buy cialis 5mg online[/url] Progesterone Hormone Replacement Store Cheap Cialis Zithromax Dry Eye

  13. Thanks for every other excellent post. Where else may anyone get that type of information in such a
    perfect way of writing? I’ve a presentation subsequent week, and
    I’m on the look for such info.

  15. whoah this weblog is great i like reading your posts.
    Keep up the great work! You already know, lots of individuals are
    searching round for this information, you can help them greatly.

  17. Magnificent goods from you, man. I have take into accout your stuff previous
    to and you are simply extremely great. I actually like what you’ve got here, really like what you’re saying and the best way through which
    you say it. You are making it enjoyable and
    you still care for to keep it sensible. I cant wait to learn much more from you.
    That is really a terrific site.

  18. Hi! This is kind of off topic but I need some advice from an established blog.

    Is it very difficult to set up your own blog? I’m not very techincal but I can figure things out pretty quick.
    I’m thinking about creating my own but I’m not sure where to start.
    Do you have any tips or suggestions? Cheers

  19. You’re so interesting! I don’t think I’ve read anything like that before.
    So wonderful to find somebody with some genuine thoughts on this topic.
    Seriously.. thanks for starting this up.
    This web site is something that is needed on the
    internet, someone with a little originality!

  21. It’s a shame you don’t have a donate button!
    I’d definitely donate to this fantastic blog! I suppose for now i’ll settle for bookmarking and adding your RSS feed to my Google account.
    I look forward to new updates and will talk about this website with my Facebook group.

    Chat soon!

  23. Hi there, i read your blog occasionally and i own a similar one and i was just curious if you get a lot of spam
    responses? If so how do you reduce it, any plugin or anything you can advise?
    I get so much lately it’s driving me insane so any assistance is
    very much appreciated.

  24. Wow, awesome weblog format! How long have you ever been running a blog for?

    you made blogging look easy. The entire look of
    your site is excellent, let alone the content material!

  26. Pretty nice post. I just stumbled upon your weblog and
    wanted to say that I have truly enjoyed browsing your blog posts.
    After all I will be subscribing to your feed and
    I hope you write again very soon!

  27. When someone writes an piece of writing he/she maintains the
    thought of a user in his/her brain that how a user can know it.

    Thus that’s why this piece of writing is outstdanding.

    Thanks!

  28. Hello there! Would you mind if I share your blog with
    my twitter group? There’s a lot of folks that I think would really appreciate your content.

    Please let me know. Thanks

  29. Hello There. I discovered your weblog the use of
    msn. That is a really neatly written article. I will be sure to bookmark it
    and come back to read extra of your helpful information. Thank you for
    the post. I’ll definitely comeback. cheap flights yynxznuh

  32. Hi there, just became alert to your blog through Google, and found that it is really informative.
    I am going to watch out for brussels. I will appreciate if you continue this in future.
    Numerous people will be benefited from your writing.

    Cheers! cheap flights yynxznuh

  33. Oh my goodness! Incredible article dude! Thanks, However
    I am encountering troubles with your RSS. I don’t know why
    I cannot join it. Is there anybody else getting similar RSS problems?
    Anyone that knows the answer can you kindly respond?

    Thanx!!

  35. That is very interesting, You are an excessively skilled blogger.
    I’ve joined your feed and look ahead to searching for extra of your wonderful
    post. Also, I’ve shared your site in my social networks

  36. Hey I know this is off topic but I was wondering if you knew
    of any widgets I could add to my blog that automatically tweet my newest twitter
    updates. I’ve been looking for a plug-in like this for quite some time and
    was hoping maybe you would have some experience with something like this.
    Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

  37. This is really fascinating, You’re an overly professional blogger.
    I have joined your rss feed and look ahead to in the hunt for more of your fantastic post.
    Also, I’ve shared your web site in my social
    networks

  42. Great blog! Do you have any helpful hints for aspiring writers?
    I’m hoping to start my own site soon but I’m a little lost on everything.
    Would you advise starting with a free platform like WordPress or go for
    a paid option? There are so many choices out there that I’m completely
    confused .. Any ideas? Kudos!

  54. In January last year, wee qwfuqk level ill. It’s okay, just a submissive buy viagra online, which passed in five days. But the temperature abruptly returned away the ending of the month: the thermometer showed 34. The boy was urgently hospitalized with fever and convulsions. A scattering hours later, three-year-old Yegor stopped breathing – he knock into a coma. With the inform appropriate of a ventilator and a tracheostomy, the doctors resumed the trade of the lungs, but oxygen starvation struck the brain. The kid has wrecked the whole shebang that he managed to learn in three years. The diagnosis is posthypoxic encyphalopathy.

Leave a Reply

Your email address will not be published.

Post comment