Business insurance protects companies from the financial risk of accidents and disasters. It’s a set of policies including general liability, commercial property and business interruption insurance. All businesses should have general liability coverage, which protects against accidents that cause damage or injury to customers or clients. Other common business insurance policies are errors and omissions (EPLI) for professional services and commercial property insurance.
General Liability Insurance
A general liability insurance policy safeguards your company against incidents that may occur there or while a client is a guest. These may involve claims for property damage or bodily injury (such as when a shopper trips over a rug and is injured). This type of business insurance typically covers repairs or replacement costs and legal fees. It also may pay for reputational harm like libel or slander. While most small businesses don’t have the resources to cover the cost of a major lawsuit, having a comprehensive business insurance policy can help deflect some of the financial burden. Plus, having the right coverage can show potential clients and partners that your business is stable and responsible.
Every owner has different business insurance needs; some risks are more serious than others. That’s why choosing a policy that fits your unique business is important. Since a business owner’s policy combines general liability and commercial property insurance into one practical package, it is a popular choice for small enterprises. You can also add on specialized policies such as professional liability, product liability and crime insurance.
Business interruption insurance is another popular option, and it can reimburse your expenses if a disaster causes you to close temporarily. It can also cover lost income, rental revenue, and the cost of additional employees. Some policies offer optional coverages such as data breach, crime, environmental, and cyber liability insurance.
Business Owner’s Policy (BOP)
The Business Owner’s Policy, known by the acronym BOP, is a bundle of coverage created with small businesses in mind. It offers protection from most of the risks that small companies face, regardless of industry. BOPs combine general liability, commercial property, and business interruption insurance into a single policy. An organization is safeguarded from liability claims for bodily harm, property damage, libel, and slander by the general liability element of a BOP. If a consumer trips and falls inside your store or one of your items damages someone else’s property, a BOP might help cover the costs of those losses. A BOP’s commercial property insurance component covers the cost to repair or replace items at your business, like laptops and furniture.
The business interruption insurance included in a BOP covers the lost income if a disaster causes your company to shut down for an extended period, such as a fire or building collapse. Typically, the smaller your company and the less expensive your property, the cheaper a BOP will be. Larger companies with more complex risks might not qualify for a BOP and may need to opt for a combination of individual policies tailored to their risk profile. In addition, some insurers exclude certain industries from a BOP, such as rental car agencies and retail stores.
Commercial Property Insurance
Business insurance provides important financial protection, whether you run a small startup or a large multinational corporation. The specific policies vary; many businesses need a custom combination of coverages to address unique risks. However, the basics will likely include general liability and commercial property insurance. Commercial property insurance helps pay for repairing or replacing your business’s physical assets if they are damaged, destroyed or stolen. It may also cover things like meeting local ordinance requirements when re-building after a loss, replacing inventory and other ongoing expenses. It is typically offered as part of a business owner’s policy (BOP) or as a stand-alone policy.
Business interruption insurance is an additional crucial protection that aids in covering income loss if your company must temporarily close due to a covered calamity. It covers fixed expenses, rent or lease payments and other ongoing costs. It may also protect lost revenue and profits. Business interruption policies are sometimes bundled with commercial property and general liability in a BOP or offered separately. Before you buy a policy, consider how much you’ll need to spend and what types of coverage are most important to you. A reputable, experienced insurance agent can help you develop the right package. Some insurance comparison websites offer business insurance quotes and can compare multiple top-rated insurers for you.
Business Interruption Insurance
Business interruption coverage pays for losses caused by the shutdown of your business due to damage or destruction of your commercial property. It also helps with fixed expenses like rent or lease payments, taxes, employee wages and loan repayments. You can get business interruption insurance as a stand-alone policy or as part of commercial multi-peril property coverage. However, to qualify for a business interruption claim, you must have a physical location that your customers can access. Suppose your business can operate in any capacity (even online or from home). In that case, you’ll need additional protection through another policy, such as a separate business owner’s or personal umbrella policy.
Additionally, to receive a business interruption payout, the damage or destruction that causes your shutdown must be a covered loss under your commercial property insurance. If the cause of the shutdown is a separate event, you’ll need to seek redress from the responsible party. Finally, business interruption coverage generally only covers direct losses to your business and cannot provide compensation for indirect or consequential losses such as the COVID-19 pandemic. Contingent business interruption (CBI) policies can be purchased to help address some of these issues. However, most CBI payouts are still contingent upon the occurrence of direct physical property damage from a covered peril.