Businesses typically carry general liability and property insurance. But they may also need vehicle coverage, business interruption and a range of other protections, including professional liability, inland marine, and crime and fidelity. The good news is there are several ways to purchase specialty coverage, which gives you as a business owner the flexibility to create an insurance plan that’s right for you.
Stand-alone or bundled options
You can buy your coverage separately using stand-alone policies, such as commercial general liability or commercial property insurance. But insurance companies and businesses alike have found it beneficial to bundle these individual coverages into one policy.
Offering these protections as a single policy makes it easier to acquire all the coverage you need and reduces the cost, since the bundled price is less than what you would pay to buy each coverage separately.
You may be familiar with business owners policies (BOPs), commercial insurance policies that provide basic property and liability coverages for small businesses. These bundled policies are offered by a number of carriers and come with standard coverages designed to protect most firms.
But did you know there might be another way to insure your business, one that provides coverage tailored to your specific industry or type of business? These plans are known as program policies and are usually offered through a managing general agent, managing general underwriter or program administrator.
What’s in a BOP?
Before we discuss the basics of program policies, let’s review what a BOP covers so you can better appreciate the differences between the two.
A BOP almost always includes property insurance and commercial liability insurance. Many policies also include business interruption, or business income, insurance.
Property insurance covers your building and the contents owned by your business. Liability protection covers any harm your business may cause others, such as bodily injury or property damage. Business interruption insurance covers loss of income resulting from a fire or other damage to your property that interrupts the operation of your business.
But there are a number of coverages that BOPs don’t normally provide, including professional liability, auto, workers’ compensation, and health and disability insurance. These you would buy separately, although some carriers will allow you to add coverages through an endorsement.
For businesses that have limited property and liability coverage needs, a BOP may be the perfect choice and the most cost effective. Small contractors, retailers, barbershops, apartments and office buildings are some businesses typically insured by BOPs.
Why a program policy might make more sense for you
If your business is specialized in any way, falls into a particular business class or might otherwise be hard to insure, you may find a program policy is better for you. There are hundreds of industries and professions that are covered by program policies.
While an insurance carrier provides the underlying insurance for these programs, they are designed, underwritten, marketed, issued and administered by an intermediary organization called the program administrator. Program administrators identify niche markets that may not be fully protected by traditional insurance products, and they contract with a single insurance company to provide a package of coverages tailored to that type of business.
For example, if you own a bowling alley, there is an insurance program for you — likewise for arborists and landscapers, architects and engineers, pool and spa contractors, security companies, limousine drivers, salvage yards, lumberyards, self-storage facilities, schools, daycare centers, restaurants, delis and bars, and other small businesses. No matter what type of business you are in, chances are there is a program available that was designed with your specific needs in mind.
Programs are marketed through agents working for a managing general agency, and the program may be affiliated with a professional society or trade association. For example, the Bowling Proprietors’ Association of America has endorsed a program for its members.
Customized coverage for your type of business
While BOPs are a one-size-fits-all approach to coverage, program policies are designed to meet the specific insurance needs of their target businesses. And because the program’s coverage is customized, it includes many insurance forms not included in a standard BOP.
Consider, for example, what might be offered to a bowling alley proprietor. A program might include coverage for the building, installed fixtures and bowling equipment. It would likely cover the furniture, stock, signs, point-of-sale systems and personal property of customers. It might have equipment breakdown, business interruption, outdoor property, liquor liability, employment practices liability and crime coverage. In other words, it offers the types of coverage a bowling alley needs.
Programs often include insurance policies you would have to buy separately if you purchased a BOP, such as commercial auto, inland marine, umbrella liability and workers’ compensation.
The Target Markets Program Administrators Association (TMPAA) has a best practices designation for program specialists. Check to see if the program administrator belongs to TMPAA and has the designation.
You should ask your insurance professional to review a program before you decide to enroll in one. In some cases, you may have to be a member of the sponsoring association to be eligible for coverage. Have your agent compare the plan to what is available in a BOP or comparable stand-alone policies.
Whether you choose a BOP or go with a program policy, the important thing is to take the steps to insure your business. In today’s challenging business environment, commercial insurance has never been more necessary to protect against costly property damage, injuries and lawsuits. Give yourself the peace of mind of knowing that your business is properly insured.