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Understanding The Business Owner's Policy

Aug 17, 2007
Business Owner's Policy or BOP refers to an insurance package, which is a combination of both property insurance and liability insurance. The reasonable price tag makes this option more attractive for the small businesses than buying separate policies for property insurance and liability insurance. Business owner's policy is not suitable for the large businesses because they do not fulfill the eligibility criteria for this policy. Insurance companies feel that large companies involve a greater amount of risk so they do not consider them for BOP.

Eligibility Criteria
Small and medium sized businesses are suitable candidates for a business owner's policy. Eligibility criteria for this policy are liability limits, premises size, nature of the business and activities performed offsite. These factors along with financial stability, location of the business, security measures, quality of construction and possibilities of fire determine the price of the BOP.

There are a vast variety of businesses eligible for business owner's policy. Some examples are bakeries, fast food restaurants, convenience stores and restaurants providing fast food, wholesale and retail traders and many other businesses related with the service industries. Interestingly, restaurants providing full services may be denied the advantage of this policy. Other businesses that may find eligibility difficult are bars, auto repair mechanics and manufacturers.

If you have property insurance, you are entitled to get reimbursement for the losses to your business property. You have two options to choose from for property insurance. First is the standard form. In this option you get compensation only if the losses have occurred due to certain predefined perils. On the contrary, if you choose Special Form, then your policy will cover losses due to any reason. However, make sure that no peril is specifically excluded in the policy. Not only the risk to your business property is covered, but the risk to machines and plants permanently installed like air conditioners, business inventory, furniture, and also property stored at other sites.

If you have the liability insurance, then the company will reimburse the amount, if any, when visitors get injured at you premises or any of your products cause an injury to the customers. You can get some additional advantages by paying extra premium coverage like losses due to dishonest employees, robbery, burglary and mechanical breakdown.

Protecting business assets against loss is as important as the insurance coverage for a home and its contents. However, you need to make sure that the amount covered is adequate. Estimate both the replacement value and the actual value of your property. BOP also covers losses occurring due to damage to property or an instance of injury.
About the Author
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
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