How Rating Systems Help Determine Costs for a Business Owners Policy
March 10, 2014
As an informed business owner you realize the advantages available to you in purchasing a business owner’s policy, or BOP. Having an all-in-one packaged insurance option that is designed for many small-business owners can be essential. The BOP allows many to save on liability and property insurance costs by bundling multiple insurance policies together for a single affordable premium. Plus, it’s convenient…you have one policy to worry about, depending on your needs.
How is the cost of a BOP determined?
Many insurers, Managing General Agencies, and Program Administrators use a rating system that employs several factors to help determine just how much to charge for this packaged insurance alternative. Variables such as multi-state policies, territory look-up by ZIP code, or city and county, and, depending on the type of business being operated, a terrorism rating can also be a factor in the final estimation for the cost of coverage. Detailed calculation worksheets and any endorsements, as well as previous cancellations and renewals, can all play a part in the final determination.
Most BOPs include Commercial General Liability insurance coverage (protection from claims of property damage or bodily injury) which protects you from the cost of defending yourself or paying the damages if an employee, contractor, customer, or other business-related third party claims that your business caused them bodily injury or harmed their property. Property insurance is included, and is needed to protect any physical assets that the business has, including equipment, furniture and appliances. Coverage for several other types of loss, including lost income, advertising damage, and more are also readily available in many bundled insurance packages.
Even if a Business Owners Policy is a good fit for your business, keep in mind that not all BOPs offer uniform coverage. Be sure to check with your insurance professional as to whether your BOP meets your business needs. Remember that insurers use a rating module to help identify how to best suit your particular business model and determine the best way to accommodate your policy demands.