If you own your business, you reap the rewards but you also shoulder a lot of responsibility. Your customers and employees are counting on you to keep the doors open. Every decision and risk you make impacts the future of your business.
Many small business owners don't think they can afford insurance, but we'd like to give you a bit more information so you can make an informed decision. If you're worried about costs, a Business Owner's Policy or BOP might be just the thing. A BOP simplifies matters by combining commercial property insurance, general liability insurance, and business interruption insurance into one. You save money by purchasing a BOP and simplify your life by combining multiple policies, which is especially handy when it's time to renew. BOPs are designed to give you broad coverage at a reasonable cost.
A survey of 30,000 small businesses in the US found that 40% have no insurance and 75% are underinsured (see here). This is concerning, considering 35.2% of businesses surveyed experienced an event last year that could have led to a claim. Public and private losses in New York City from Hurricane Sandy in 2012 have been estimated at $19 billion dollars. If weather and natural disasters aren't making you nervous, what about humans? Small businesses aren't exempt from lawsuits. The average cost for a business to defend against a slip and fall claim is reported at $50,000. Or say your business posts its vacation hours on social media, and a savvy follower uses that information to pick your locks and snatch all of your electronic equipment. Once you begin to think about the everyday risks of owning a business, they start to add up.
Businesses that can benefit from a BOP include those worried about having assets stolen or those worried about lawsuits. Anyone who doesn't want to gamble with their assets should consider a BOP. Restaurants, shops, and independent contractors should all seriously consider a BOP. The benefits of this type of policy include protection from unexpected losses that general liability won't cover. For example, BOPs with business interruption coverage allow you to relocate to a new space if your building is destroyed. This type of coverage will ensure you're safe if you loose income from a fire or disaster that prevents you from operating your business. According to the Federal Management Agency or FEMA, 40% of businesses don't reopen after a disaster and of those that are able to reopen, less than 30% are still in business two years later. The right BOP is a step in the right direction if you want to make sure you're in that small percentage of businesses able to reopen and survive.
What's not included
A BOP does not typically cover workers' compensation, auto insurance, cyber insurance, or disability insurance. That said, BOPs can be customized to meet your needs by adding endorsements and riders. For example, if you need to insure vehicles that your employees use for work, you can add a commercial auto insurance policy to your BOP.
If you require more than 12 months of business interruption coverage, a BOP typically isn't for you. Predictably, you also need to be a small businessowner to qualify for a BOP and you need to be in a low-risk industry. Construction is considered a high-risk industry that wouldn't be eligible for a BOP. If a BOP isn't for you, there are other options. General Liability will protect many businesses from liability risks.
A BOP is often a great place to start but it also might not be the only policy you need. The risks and needs of each business are different and depend on your size, location, and the risks you're exposed to. It's important to keep this in mind when considering the insurance needs of your business.
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Not sure what policy is right for you? That's okay! Navigating the world of insurance is tricky. That's why we're here to help. You can always contact our office with questions and concerns. We want you to understand your options and make the right decision. We'll also shop around for you and make sure we find you the lowest price with the terms and benefits that work best for you.
Running a business is a lot of work but you don't need to do it alone. If you're looking for more resources and advice, the Small Business Administration has a tool on their website where you can find local assistance and mentors nearby: SBA Local Assistance Tool. There is also SCORE, a nonprofit dedicated to helping small businesses by providing free and confidential mentoring, tools, tips, and workshops. As a business owner, you have a lot of responsibilities that can seem daunting at times, but this doesn't have to be the case. Working with a trusted insurance agency should remove the stress surrounding the uncertainty of your business's lability and protection, allowing you to enjoy and grow your business.