Who is Not Eligible for a Business Owners Policy?

When you’re looking for commercial insurance for your business, you’ll come across insurance agencies offering several different packages. These packages are designed to bundle commercial insurance for a cheaper rate than purchasing individual policies. One of these packages is a business owners policy, or a BOP. A BOP combines property coverage and general liability.

This isn’t a one size fits all policy, however. There are certain requirements your business must meet to qualify for a business owners policy. There are three main factors that are considered regarding a BOP: business size, income and industry risk. These size categories are used and developed by the North American Industry Classification System (NAICS). The Small Business Association (SBA) uses these guidelines to determine whether a business is a “small business” or not.

Business Size

A business owners policy is designed for small businesses. The category of “small business” varies depending on the insurance company and the industry your business is in. Some businesses are only considered small if they have 250 employees or less. Others are considered small even if they have 1,500 employees.

Income

The income your business makes can help determine if your business is small or not. Revenue limits vary once again depending on the industry. Some companies may only be considered small businesses if their annual revenue is less than $1 million. Others can earn over $10,000 in annual revenue and still be considered a small business.

Industry Risk

Your business’ industry is the main player when it comes to qualifying for certain insurance packages. A small business in retail has very different limits and requirements than a small business in a government agency, for example. In general, BOPs cater toward small businesses in low-risk industries. This means industries that have a low likelihood of claims and lawsuits are more likely to qualify for a BOP.

Low risk industries include:

• Retail
• Pet supplies
• Bookstores
• Beauty
• Tutoring

Examples of high-risk industries include:

• Law
• Medicine
• Finance
• Health and wellness
• Tobacco

Keep in mind that these are not comprehensive lists. Other industries may fall into either category.

To summarize, BOPs are best suited for small businesses in low-risk industries that earn less than a set amount in annual revenue depending on their industry.

This doesn’t mean that there is no option for larger businesses, however. As opposed to a BOP, larger businesses can insure their assets with a commercial package policy (CPP). A CPP is a more flexible version of a BOP geared for larger businesses and high-risk industries. This package also combines property insurance and general liability insurance, but can also expand to include:

• Business Income Insurance: If an accident or disaster makes it impossible for business to continue as normal, business income insurance will compensate the company for income lost while the business was inoperable.
• Commercial Auto Insurance: Many large companies own vehicles or use personal vehicles for work purposes. Commercial auto insurance provides auto insurance coverage for vehicles used, owned or borrowed by the business.
• Crime Insurance: Property insurance only covers a limited type of theft. Crime insurance provides compensation to the business if an employee is caught embezzling or committing other crimes to cost the business money.
• Employment Practices Liability: Employment practices liability covers claims against the company from employees concerning certain employment practices, such as sexual harassment and discrimination.

Neither BOPs or CPPs cover health insurance, life insurance or workers compensation.

If you’re in doubt about whether your business qualifies for a business owners policy or a commercial package policy, speak with an insurance agent about the industry and parameters of your business.