THURSDAY, APRIL 27, 2023
To get essential insurance coverage for your small business, you might find the perfect solution in a business owners policy, also known as a BOP. When you buy a BOP, you will receive several essential pieces of critical insurance coverage in one package. This offers convenience both for your overall policy management strategy and your overhead costs. BOPs only have one premium, which offers ease of payment to most policyholders. However, what you might wonder is exactly what this premium will be?
The price of all insurance policies can vary, even if a policyholder buys an identical policy as someone standing next to them. That’s because multiple risk factors can influence the cost of your policy, not just the policy alone. BOPs are no different.
When putting together your policy, your insurer will analyze these risk factors to determine how likely you are to file a claim on your BOP and pose a cost risk to them. As a result, if your risk level is higher than someone else’s, your BOP will likely cost you more.
So, what are some of these risk factors?
1. The Coverage Limits You Choose
Supply and demand apply to BOPs just like they do to any other product you purchase. If you buy higher coverage limits, then you will pay more. After all, by buying more coverage, your insurer has a higher chance of paying a lot of money for one of your losses. Therefore, they’ll have to charge you more.
2. Your Industry
Some businesses face higher liabilities than others. After all, if you own your own restaurant, you might face a lot more exposure risks than you do if you run a computer repair business.
3. The Size of the Business
If you have more employees, then it is easy to understand that you face higher operating risks and likely have more property value that you need to insure. Therefore, you’ll probably face a higher BOP cost.
4. Your Location and Property Value
In all communities there are different property damage risks and liabilities that could strike any business. These risks could even vary from block to block in the same community. Therefore, based on where you are located, you might have to pay more for your policy. Additionally, if you have a high property value, then your coverage needs (and your premium) will increase.
5. The Policy’s Claims History
If you make a claim on your BOP, then this is an indicator that you might have to make a claim again in the future. Therefore, it shows your insurer that you are a higher insurance risk on paper. That’s why most insurers review several years of your insurance history when determining your rates.
Of course, BOPs are offered by multiple insurers, and some will offer better costs for one client as opposed to another. Therefore, when helping you choose your BOP, your insurer can review multiple policy options from multiple insurers to help you choose the one with the best affordability for you.
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