What is a Business Owner’s Policy & Why Do I Need One?

There are so many things to consider when it comes to running a business. If you’re running a small business then you may think that you are priced out of the market due to high premiums or eligibility.

That’s where Business Owner’s Policies come in. They’re designed to cover the business-critical elements of your business while also being affordable.

Let’s look at why this type of policy could be right for your business.

What is a Business Owners’ Policy?

In simple terms, a Business Owner Policy is an overarching insurance policy that rolls all essential coverage into one single policy.

A standard Business Owner’s Policy incorporates a declaration, form, common conditions statement, and any relevant endorsements.

As the policy is not bespoke and designed to offer a package of support to a pre-defined target market, it is a lot simpler to set up than other insurance policies.

The cost of the policy is generally a lot less of a financial outlay than if buying each individual insurance separately.

Perhaps now, more than ever, businesses are keen to protect themselves from unexpected events and conditions.

What is covered under the policy?

A standard policy typically included protections against:

Property damage – more commonly described as ‘named-peril coverage’.  This covers the costs for damage caused by specifically named events including fire, flood, vandalism, and explosion.

If you are looking for a Business Owner’s Policy that covers all eventualities for property damage, you will need to find a company that offers this level of coverage.

Property covered can be owned or rented and you are also covered for items owned by a third party but stored in your property.

Liability – if your company is found legally responsible for inflicting damages on others through defective products,  faulty installations. injury, and property damage.

Business interruption – reclaim and business income lost through disaster, fire, or another catastrophic event.

Some insurers allow businesses to take out additional coverage as part of their Business Owner’s Policy for a low premium.  These can typically include:

  • Cybersecurity and electronic data
  • Civil Authority
  • Business Income
  • Interruption of computer operations
  • Accounts receivable

Figures from Statista show that between 2013 – 2018 24% of all insurance claims were due to damage and losses from fire or explosion.

What is not covered by a business owner’s policy?

There are several areas that are not typically included in a Business Owner’s Policy for which businesses will need to take out separate policies. These include:

  • Health and disability
  • Professional liability
  • Worker’s compensation
  • Automobile insurance

Does my business need it?

Pros – SMEs benefit from being able to obtain a high level of coverage for a low-level premium. The cost of buying all the insurance policies separately could be prohibitive for some businesses.

You’ll also save time and money on research and admin by rolling everything up into one policy with the same insurer. In SME’s, money and budgets need to stretch a long way and this helps with that cash flow situation.

Unlike a Business Owner’s Policy, standard policies do not include business income as part of their property section.

Cons – as Business Owners Policies are packaged to offer broad support to a certain type/size of the business, it is not as flexible in its terms or modifications as standard policies are.

Features such as professional liability are often used as a ‘perk’ to employees in certain sectors. Seeking this out separately can be a costly outlay for a small business.

The named-peril clause within the property portion of the policy can be restrictive. You are only covered in the event of a few, specifically named, incidents. You may want to consider your risks before signing an agreement.

It is strongly recommended that before taking out any kind of insurance policy, you perform a thorough risk assessment on your business. This will allow you to choose the right level of coverage for your particular set of circumstances.

A risk assessment will prevent you from taking out overly expensive policies that you don’t need or underinsuring your business with potentially devastating consequences.

Is your business eligible?

Business Owner’s Policies are not available to every business. They are targeted at SMEs who need to meet certain eligibility criteria to be accepted for a policy.

These criteria can differ slightly between insurers but often include the geographic location, annual revenue, size of the property, and business sector.

Businesses from many sectors are eligible, including:

  • Fast food restaurants/cafes (minimal cooking)
  • Retail stores
  • Hotels
  • Salons and barbershops
  • Small residential contractors
  • Landscape gardeners

For the property portion of the Business Owner’s Policy, there are certain restrictions on the type and size of property that is covered under the policy.

Office buildings cannot be taller than 6 stories or exceed 100,000 square feet. Buildings used for retail, wholesale, or services cannot exceed 35,000 square feet.

As a Business Owner’s Policy is packaged together to offer insurance services to companies with a similar level of risk, this excludes certain sectors including:

  • Cinemas and theatres
  • Banks
  • Factories
  • Garages and mechanics

These types of businesses have a higher risk profile and need a more specialized range of policies to cover their specific needs.

Business Owner’s Policies from Keller Insurance Services

Our experienced team can help you find the right Business Owner’s Policy for your business at an affordable premium.  As an independent agency, we look to find you the best coverage at the right price from our network of insurance providers.

If you’re unsure whether or not your business is eligible, we can help you

We offer a range of additional coverages to complement your Business Owner’s Policy for true peace of mind. Start protecting your business today.