A business owners policy, or BOP, combines certain coverages into a single policy that's typically more affordable for small businesses than purchasing separate coverages. There's often confusion in what a BOP covers, however.

A basic BOP includes:

• General Liability: This covers incidents involving bodily injury or property damage to a third party that occurs as a result of normal business operations. This can include faulty installations and products.
• Property Insurance: This covers physical buildings and their contents in the event of fire, smoke, lightning, wind, hail, theft or vandalism and more.
• Business Interruption Insurance: In the event a disaster makes it impossible to operate, business interruption insurance helps cover the income lost while business operations are put on hold. It can also help with the cost of moving the business to a temporary location.

BOPs provide important coverages that all small businesses need, but these policies don’t cover everything. They're also not flexible with the type of insurance you can add. For example, BOPs do not include professional liability insurance. Professional liability — also known as E&O insurance, or errors and omissions insurance — provides compensation if your company is accused of professional negligence.

What Does a Business Owners Policy Not Cover?

BOPs don't cover:

• Auto Accidents: If your business operates with the use of owned or borrowed vehicles, you will need commercial auto insurance. Commercial auto insurance provides coverage for a range of accidents for work vehicles. It typically includes comprehensive, collision, personal injury protection, uninsured/underinsured motorist and liability coverage.
• Workers Compensation Coverage: Workers compensation insurance steps in if an employee is injured while on the job. It can provide compensation for medical expenses, disability and lost income.

Small businesses often invest in BOPs because, while not very flexible, they're often affordable and provide crucial coverage. The average cost for a BOP is about $1,200 a year, which is only about $100 a month. On its own, the average cost of general liability insurance can be as much as $2,758 a year.

Costs for a BOP depend on a variety of factors, such as:

• Size of the Business
• Credit Score
• Claims History
• Coverage Limits
• Location
• Business Experience

For larger businesses, there is a policy package available that's more expensive but offers more flexibility in coverage. This is a commercial package policy. It includes everything in a BOP, but allows you to add more coverage.

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