Business Owner Policy Exclusions

A business owner policy is an extremely comprehensive coverage. It is usually written as an all-risk policy unless the insured requests the named peril policy.

All-risk coverage is an insurance policy which covers losses from any and all causes which are not specifically excluded in the policy.

Named peril coverage is a policy which covers only specific losses which are listed on the policy. It is the opposite of all risk-coverage.

Below is a list of perils which are usually excluded from business owner policies.

  • Nuclear hazard;
  • Operations executed by the government;
  • Military actions;
  • Weather conditions;
  • Smog or pollution;
  • Water, including flood, seepage, or sewer backup;
  • Earthquakes;
  • Intentional illegal actions performed by the named insured;
  • Criminal acts or fraud performed by the employees of the named insured;
  • Errors in the computer system of the insured business owner;
  • Errors and omissions in computer operations;
  • Explosion of machinery such as engines or boilers;
  • Power failure;
  • Damage or loss caused by normal wear and tear;
  • Loss of market;
  • Losses caused by animals, birds, or insects;
  • Decay, rust, or corrosion; and
  • Property loss resulting from faulty design, planning, or development.

    It is important that a business owner understands the exclusions and realizes that it is probable that different coverages need to be obtained to “fill in the holes” left in these exclusions.

    This is best done by working with a licensed insurance professional who understands what you do and how and can recommend the other coverages you may need to avail yourself of.

    Lawyers and Insurance

    We are frequently asked about what insurances are needed for specific types of businesses. To such questions, we respond that there are commercial insurance products for almost all businesses!

    Every business, no matter what product or service it provides, needs to be protected, along with the owner, board, and officers.

    All businesses, except for those in Texas, are required to carry workers compensation. And while it is not legally required in that state, it still makes sense for those businesses to avail themselves of such coverage. All businesses need to carry a general liability policy as well as property and casualty insurance.

    Frequently, a Business Owner’s Policy, also known as a BOP, will cover both.

    Property and casualty insurance protects a business’s office, fixtures, inventory, furniture, and equipment. Vehicle coverage may be included or a separate policy but falls under the “P & C” heading. We’ll cover more about vehicle insurance in a moment. Overall, this policy will cover these items whether damaged, stolen, or perhaps even lost.

    The general liability policy covers the business owner as well as other people who are involved in the business. Typically, this policy covers legal costs associated with lawsuits including settlements and judgments. This policy will cover damages to a third party and also bodily injury.

    Now, specific to the attorney, it is important to determine with your insurance professional whether a Professional Liability policy or Errors and Omissions (E&O) insurance is necessary. E&O insurance is additional coverage not covered in the general liability policy. Attorneys, accountants, and engineers would all be wise to avail themselves of this additional coverage, as it offers a far greater and more specific liability coverage.

    Review the specifics of your business with your licensed insurance professional. Together, you will be able to determine the proper coverage necessary to reduce the risk exposure of your business.

    Automobile Repair Shop Business Insurance

    Car dealerships, like other industries, have run into trouble in the recent economic times.  Like other professions, auto mechanics may find themselves laid off or working less than full time. Some mechanics have opted to open their own repair shops as a result.  Like any business, auto repair businesses and the mechanics that own them need to get the proper insurance in place.

    For any type of business, there are several basic needs, and some specialty insurance coverage to consider.  General liability is the first piece of putting together an auto repair business insurance package.  No matter how diligent you are, everyday you are at risk of being sued.  Court costs and legal fees, damage awards, and time spent can financially ruin a business.  A general liability insurance policy will cover costs and protect the assets of the business.  Garage keepers insurance also needs to be discussed where you are keeping customers vehicles for a period of time.  Product liability insurance is another option that needs serious consideration.  If you are towing vehicles, tow truck insurance will cover liability and damage claims in transit to the repair shop as well as bodily injury and property damage.

    Property insurance is the next insurance a business including auto repair shops need to consider.  Property insurance will cover the building structure and furnishings as well as some equipment.  Additional options that should be discussed include employee’s tools, debris removal and pollutant clean up, computer equipment, and equipment breakdown or boiler and machinery insurance.

    A business owner’s policy can provide a good insurance package by combining the coverage discussed.  In addition, many of the options can be added as part of the business owner’s policy instead of purchasing separate policies for each.

    If the auto repair business has employees, then as a rule, workers compensation is required.  This is always purchased as a separate insurance.  While every state varies in specific standards, we recommend having workers compensation in place from the first employee hire.  In addition, it may make sense to explore crime insurance and employment practices insurance as well.

    Don’t assume your auto repair business is adequately insured.  Talk to a licensed insurance professional who understands the needs of your business.  Together you can design a plan to meet both risk and the budget.

    Common Mistakes

    Anyone involved in the insurance profession is familiar with the common mistakes people make regarding business insurance.

    Setting limits too low: Oftentimes, business owners do not understand that the largest amount of money in a policy is the initial policy, and that extra coverage is usually a very small amount. It is, in fact, often possible to double one’s limits for less than 10% more money.

    Not reading the policy: Although insurance policies are usually long and involved, they are contracts, and it is important that the policy be read before you sign it. If you simply cannot do it, you should get an attorney to do it for you.

    Not understanding duties: Business owners’ policies carry with them duties to defend or indemnify, and it is essential that the business owner understand those duties. It needs to be clear in your mind whether or not your insurer will defend you if you get sued as well as what they will pay if there is a judgement against your business.

    Neglecting business interruption insurance: While you are probably covered for such things as fire or flood, you will quite likely want to be insured for the loss of income during the time your business might be closed due to those incidents and their aftermath.

    Finding the right insurance company: The importance of finding the insurance company and policies which will suit your needs cannot be stressed enough. Given that an uncovered lawsuit could mean the end of your business, it is essential that you find just the right company.

    Discussion with your licensed insurance professional is the first step to avoiding all of these common errors.

    The Business Owner’s Policy and You

    Is a business owner’s policy, often called a BOP, right for you?

    In past articles we’ve discussed the basic insurance needs a business needs to protect itself starting out and in the early years. These basic insurance types are general liability, property, and if you have employees, worker’s compensation insurance. A Business Owner’s Policy or BOP may be a good starting point for your new or small business.

    BOP’s can cover many of the risks associated with a business while keeping the premium you pay in balance with a small business. It’s important to note that worker’s compensation must be purchased as a separate policy.

    Business Owners Policies are quite inclusive of the coverage options provided for the business. It is important for you as a business owner to review the specific coverage in detail with your licensed insurance professional. More important however, is a review of the exclusions. You need to know what is not covered as well as what is. Here are some of the common exclusions to BOP’s you want to be aware of as you consider a BOP.

    Boiler and Machinery insurance, also known as “equipment breakdown” or “mechanical failure,” is often not included in a business owner’s policy. Review with your licensed insurance professional if this is a coverage your business would need. Debris Removal insurance is also coverage generally excluded by a business owner’s policy.

    Businesses located in areas where tornadoes, hurricanes, and flooding exist may want to consider this type of coverage. Property insurance will generally cover rebuilding, but not the clean up and debris removal necessary to get the rebuilding process started.

    Commercial Fleet (vehicle) insurance is generally not covered in a business owner’s policy. Since vehicles are an expensive asset, it is important to maintain coverage on them. The loss of a truck, a delivery van, or other vehicle(s) critical to your business could have a serious impact on your business and its cash flow.

    Business owner’s insurance will generally have business interruption insurance included. This type of coverage will pay fixed expenses and even salaries in the event the business closed or even temporarily relocated as a result of a covered incident. Professional liability coverage can also be added.

    Ask your licensed insurance professional if a business owner’s policy may be appropriate for your business.

    Business Owner’s Insurance Policy

    A Business Owner’s Policy–also known as a BOP–is an insurance package that combines Commercial Property insurance and General Liability coverages into one policy.  It can also come with other endorsements for small and medium size businesses that fit certain risk classes.  (Some of the factors that go into determining eligibility include annual sales and number of employees.  Commercial Property insurance covers physical assets and General Liability addresses your commercial liability for injuries and damages to a third party).

    Get a quick, free quote for a Business Owner’s Policy by calling 1-877-907-5267 and speaking with one of our insurance specialists today.