Business owners need to take care of a variety of risks. It includes the risks of personal injury, third-party liabilities, and damage to own property due to man-made and natural disasters. To cover these risks, they often get multiple insurance policies for their business. These risks can be covered simply by getting one business owner’s policy. As per the business owner policy definition, it is insurance that combines the benefits and coverage of business liability and property insurance into one standard comprehensive policy.
What is a Business Owner Policy?
A business owner’s policy (BOP) includes multiple coverages like commercial property insurance, general liability insurance, and business income cover. General liability insurance covers the risks associated with physical injuries and property damages inflicted on a third party within the business premises. The business income cover includes the financial loss coverage for business interruptions. A commercial property insurance policy covers the own property damage cover due to man-made and natural calamities. A comprehensive BOP insurance may also include additional coverage for theft, forgery, fraud, and other risks.
Why should we get a Business Owner’s Policy (BOP) Insurance?
A general liability insurance policy provides coverage to only third-party liabilities. It does not include protection to own property and also does not reimburse the medical costs for injuries of employees. On the other hand, a commercial property insurance policy protects the property but does not include coverage for third-party liabilities. A business owner’s policy combines the benefits of both these insurance policies. It also includes coverage for business interruption which is usually included in a comprehensive commercial or business property insurance. As a result, it negates the need to avail multiple policies separately.
A business owner’s policy saves the cost of getting multiple policies for your business. It also extends the coverage for business risks like burglary, housebreaking, thefts, vandalism, etc. The cost of covering third-party liabilities or self-property damages due to earthquakes, floods, lightning, and other disasters can put your business into a serious debt trap. Small businesses often go bankrupt due to heavy losses due to damages. This can be prevented by getting a business owner’s insurance policy.
Key Features of Business Owner’s Policy (BOP) Insurance
- Coverage for business interruption: A natural disaster can damage your business property and interrupt regular business operations. The loss of income due to business interruption can result in heavy losses for your business. The coverage for business interruption also includes the rent and other costs involved in moving your business to a temporary location.
- Extensive coverage for property: The commercial property insurance coverage offered by BOP extends protection to business property, equipment, furniture and fixtures, inventory, and business documents. It also includes protection for your business property from vandalism, riots, earthquakes, floods, fire, explosions, thefts, and more.
- Coverage for third-party liabilities: A third party can file a lawsuit against your business for bodily injuries or property damages. These injuries/damages might be caused due to your products or during the regular operations of your business. A business owner’s insurance policy includes a complete cover for different types of third-party liabilities. It also includes coverage for reputation damage, advertising injury, copyright claims, and other financial losses inflicted due to third-party claims.
- Add-on coverage: A business owner’s policy can be customized to fit your business requirements. For instance, if you run an e-commerce store or collect important business data through your website, it may be sensible to buy a business owner’s policy insurance with data-breach coverage.
Characteristics of Business Owner’s Policy (BOP) Insurance
- Who is eligible for a business owner’s policy?: The exact requirements for a business to qualify for a business owner policy vary from one policy to another. A business owner’s policy is typically meant for small businesses that have an annual turnover of less than Rs. 1 crore. The business owner should have less than 100 employees to be eligible as per the business owner policy requirements.
- Policy limits: Business owner policy coverage comes with policy limits. The policy limit should match the value of your property because it will be the maximum sum insured you will get for property damages. Due to policy limits, a business owner’s policy is only suitable for small businesses.
- Add extensions: As a business owner, you might have to add extensions to your business owner policy coverage to make it suitable as per your specific requirements. For example, if you own a restaurant, you may need a liquor liability cover to stay protected from the damages caused due to intoxicated customers.
- Flexible: A business owner’s policy is known for its flexibility as you can modify the sum insurance and policy coverage as per your business requirements. It is compatible with a wide range of add-on covers and offers complete insurance for most business types.
Types of Business Owner’s Policy (BOP) Insurance
Some types of BOP insurance classified upon the business type are mentioned below:
- Petrol Pump Insurance: This type of business insurance is specially designed to protect the property and assets of petrol pump owners. It includes a third-party liability cover along with protection against fire, natural disasters, and other perils.
- Restaurant Insurance: A restaurant insurance policy is designed for restaurant owners to protect them from financial risks due to thefts, riots, burglary, fire, and acts of god. It also includes public liability cover, loss of money in transit cover, and other benefits.
- Comprehensive Liability Insurance: This type of insurance is offered to businesses that need comprehensive general liability insurance. Along with a third-party liability cover, this insurance policy also provides coverage for damages due to products, personal injury cover, fire damage cover, and more. Business owners who want coverage against a broad range of liabilities can get it.
Business Owner’s Policy (BOP) Insurance Available in India
| Policy Name | Sum Insured | Policy Period | Key Features |
|---|---|---|---|
| Office Package Policy by ICICI Lombard | As per coverage needs and business requirements | 1 year | Includes protection from fire, acts of god, and other perils. Comes with a public liability cover and employer’s liability cover. Critical care insurance cover is available to cover the medical expenses of the employees. Specifically designed for IT businesses. |
| Business Guard Commercial Package Policy by TATA AIG | As per coverage needs and business requirements | 1 year | Includes asset protection cover, public liability cover, employer’s liability, workmen’s compensation, and other benefits. Optional cover for burglary, equipment breakdown, material damage, etc. is included in this business owner policy coverage. Includes loss of money in transit cover. Provides a complete suite of insurance covers to fulfil your specific business requirements. |
| Business Guard by Axis Bank | As per coverage needs and business requirements | 1 year | Insurance policy can be customised as per your business type and needs. Material damage, business interruption, personal accident, workmen’s compensation, public liability, and much more can be covered under a single comprehensive policy. Ideal insurance plan for SMEs (Small and Medium-Sized Enterprises). |
Inclusions & Exclusions For Business Owner’s Policy (BOP) Insurance
What’s covered?
- Property damages due to acts of vandalism, drastic weather conditions, burglary, theft, or accidents are covered under this policy. It covers the damages to furniture, inventory, and any other business property that gets damaged during the business operations.
- Business owner policy coverage includes protection to the rented or leased property to cover the property damage claims filed by the landlord.
- Claims filed by a third-party for bodily injuries, personal injury, and property damages are covered under this policy. The medical expenses incurred due to physical or mental injuries to a third-party are also covered under it.
- The interruption or loss of income caused due to a disaster, theft, or vandalism is covered under the business owner policy coverage. It also covers the losses that are caused due to slowing down of business operations after an accident.
- The legal expenses incurred in defending defamation, copyright infringement, and reputational injury cases are covered under this policy. It also includes coverage for the lawsuits filed by the competitors due to the advertisements that affect their business.
What’s not covered?
- The business owner’s policy does not cover worker’s compensation i.e. coverage for the illnesses or injuries sustained by workers while completing the work.
- Property damages caused due to negligence, breach of contracts, etc. are not covered by this insurance. It is to be covered under professional indemnity insurance.
- The vehicle accidents that occur while driving for business purposes are not covered under BOP insurance.
- The claims raised by the employees against racism, gender-bias, and other forms of workplace discrimination are not covered under this policy.
- The damages caused by a person who is under influence of alcohol or drugs are not covered under BOP insurance.
- Damages caused to machinery or equipment due to sudden breakdown or gradual wear are not covered under business owner policy coverage.
- Damages or financial losses incurred due to virus attacks, data breaches, hacking, and other related issues are not included in the business owner’s policy insurance.
Who should get a Business Owner’s Policy (BOP) Insurance?
Businesses located in high-risk locations i.e. the locations that are prone to natural or man-made disasters can get BOP insurance. The companies that need to store expensive inventory, cash, and products should also get this type of insurance. The type of businesses that stand a higher risk of lawsuits can also get it to stay financially protected.
For example, a business that sells life saving kits stands at a higher risk of liabilities filed by their customers. They must get a business owner’s insurance policy to remain secure from the liabilities caused due to their products or services. Shops and offices that run from physical locations must get it to cover incidents like fire, explosions, thefts, burglary, and housebreaking.
Businesses like advertising companies, digital marketing agencies, etc. should also get it to stay protected from third-party claims due to copyright infringement and reputational damage due to misleading ads. For example, you say something about a business in a public interview and they file a defamation lawsuit against you. In this case, BOP insurance will cover the legal expenses incurred to defend your case in the court. Typically, these types of companies get a business owner’s policy:
- Restaurants
- Wholesalers
- Manufacturers
- Food and beverages companies
- Non-profit organisations
- Insurance companies
- Healthcare organisations
- Construction companies
- Any small business that runs a physical store
Things to consider while getting a business owner’s policy
- Evaluate all the business risks: Before getting a business owner’s policy, you must evaluate all the risks that your business is exposed to. It will help you to decide the coverage requirements and sum insured. Also, it will help include specific requirements of your business. Suppose that you run a healthcare company and store the sensitive health records of your customers on your website. In this case, it would be sensible to get a cyber risk insurance policy along with BOP insurance.
- Compare multiple policy quotes: It is possible to get insurance policy quotes from different insurance companies without spending anything. You should compare the quotes of several insurers before buying BOP insurance for your business. You may also speak with insurance agents to get the best insurance policy as per your specific business needs.
- Re-evaluate the risks frequently: As your business grows, it can be exposed to different types of risks and liabilities. As a result, you must re-evaluate your liabilities and risks frequently to cover all your requirements.
How to claim Business Owner’s Policy?
The following steps can be followed while claiming for a business owner’s insurance policy:
Step 1: Inform the insurer
Inform the insurer immediately after receiving any notice or claim letter from the client. If any of your clients, vendors, and other third-party individuals suffer from property damage or injury at your site, you should report the incidents to the insurer at once. After reporting the incidents, the insurer will ask for your policy details like name of the policyholder, policy number, etc. after that, they will ask you to file an application form.
Step 2: Fill the claim application
The claim application form should contain all the details of the incidents. You should also attach the claim letter of the client and other supporting documents that verify your claim.
Step 3: Cooperate with the surveyor
The insurer will appoint a surveyor who will inspect the site for evaluating the nature and extent of damages. Cooperate with the surveyor completely and help him create a detailed inspection report in your favour. It may require a few days to complete the claim settlement procedures and formalities. Be patient and extend your full support to the insurer during this period.
Documents required to support the claim
- Claim application form (duly filled)
- Copy of FIR report (for thefts and other events)
- Photographs of the incident/injury
- Evidence proofs
- Property evaluation report from a third-party (in case of property damages)