Business owners policy 5% Flashcards
Business Owner Package:
BOP
Business Owner Package covers
● Bundles property, liability, and income protection in a single package
● A “homeowner’s policy” for small businesses
BOP Features
● 12months business income coverage
● 12months extra expense coverage
● Inflation guard for buildings and structures
● Liability protection for lawsuits from accidents or products
● Slander and copyright protection
● Deductibles on most claims
● RC valuation (ACV endorsement option)
● Open-peril coverage (named-peril endorsement option)
Not typically included in BOP
● Coverage for company owned vehicles
● Professional liability coverage
● Malpractice coverage
Insurance-to-Value Provision
not technically called “coinsurance,” but works in the
same way:
Policy pays RC if coverage is at least 80% of property’s value
Insurance-to-Value Example
● Jack has a $400,000 policy on his $1million store
● A vandal breaks Jack’s $10,000 chandelier
○ Replacement cost x(amount of insurance/80% of property value)=
$10,000x ($400,000/$800,000)=$5,000
○ ACV is $2,000 due to depreciation
● Jack’s insurer will pay the higher of the two amounts: $5,000
Wholesalers and Distributors
BOP qualifications:
● Retail sales account for 25% or less of gross income
● 25%or less of floor space is available to general public
Processing and Servicing Businesses BOP qualifications:
● Annual sales are under $3 million
● No more than 25%of sales occur off-premises
Limited Cooking and Fast Food Restaurant
BOP qualifications:
● 7,500 square feet or fewer
● Max seating:
○ Limited cooking: 75
○ Fast food: 150
● No liquor sales
● Beer and wine sales no more than 25% annual income
● Maintenance of fire extinguishing equipment
Convenience Store
BOP qualifications:
● Gasoline sales less than 75% annual income
● No auto repair or car wash
● No propane or kerosene sales
Self Storage Facility
BOP qualifications:
● Maximum of two stories (but floor space not limited)
● No storage of pollutants, waste, chemicals, industrial materials
Specialty Contractors
BOP qualifications:
● Annual payroll no more than $300,000
● Annual sales no more than $3,000,000
● No heavy construction
● Subcontracted work no more than 10% total sales
● No working on buildings over three stories
Motels
BOP qualifications
● Up to three floors
● No bars or cocktail lounges
● Not seasonal
● Not closed more than 30 days per year
Apartment Building and Condominium BOP eligibility:
● Occupancy must be residential or office
● Incidental occupancy no more than 25,000 square feet
● Incidental occupancy by contractors not exceeding 7,500 s.f. or 15%
Note: Incidental occupants are businesses or offices
Office Building
BOP qualifications
● Less than 100,000 sq. ft.
● No higher than six stories
● Tenants occupy no more than 25,000 sq. ft.
● Contractors occupy no more than 7,500 sq. ft. or 15% of total sq. ft.
Ineligible for a BOP:
● Car dealerships, service stations, repair shops
● Parking lots, garages
● Amusement parks
● Bars, nightclubs, and the like
● Banks and similar financial institutions
● Manufacturing, processing, servicing businesses (except those eligible)
● Condominium associations (except residential and office)
Note: No coverage for household personal property with BOP
BOP Section I:
Property Coverage
BOP Structure:
● Section I- Property
○ Coverage A
○ Coverage B
○ Additional Coverage
○ Extensions to Coverage
● Section II- Liability
○ Coverages
● Section III- Common Policy Conditions
Section 1: Property- Coverage A
Buildings and Structures
Section 1: Property- Coverage A Buildings and Structures
● Buildings and structures on dec page
● Additions completed or under construction and construction
materials
● Fixtures, equipment, machinery permanently installed
● Building maintenance equipment
● Flooring, floor coverings
● Outdoor fixtures
● Heating, ventilating, refrigerating, cooking, washing equipment
● Owner’s furniture in apartment rented as furnished
Section 1: Property- Coverage B
Business Personal Property (BPP)
Section 1: Property- Coverage B Business Personal Property (BPP)
● Furniture belonging to the business
● Loosefixtures, machinery, office equipment, stock
● Other personal property owned and used by business
● Property of others in the custody of the insured
● Improvements made at a tenant’s own expense
● Leased business personal property that must be insured
● Business personal property in the open or in a vehicle 100 feet away
● Value of labor, service, materials arranged for others’ personal property
Section 1: Property- Coverage A and B Exclusions
● Currency, stock certificates, bullion
● Vehicles and aircraft that must be registered
● Watercraft while in water
● Contraband and property being illegally shipped or traded
● Land, water, lawns, crops
Excluded, unless covered by policy extension:
● Outdoor antennas
● Outdoor signs
● Trees and other plants
BOP Section I Additional Coverage
Additional Coverage at no extra charge:
● Inflation guard
● Debris removal
● Preservation of property
● Fire department service
● Business income
● Extra expense
● Pollution cleanup
● Electronic data
● Fire extinguisher recharge
● Fungi, rot, bacteria
● Dependent property
● ICC
● Collapse
● Glass
● Counterfeit money
● Forgery
● Computer interruption
BOP Section II
Liability
BOP Section II Liability Coverage in a Business Owners Policy:
● Uses the occurrence form: covers damages occurring during policy term, no matter when claim is filed
● Covers liability for bodily injury and property damage from business operations and premises
● Covers product and operations liability
● Has aggregate limits
Uses the occurrence form:
covers damages occurring during policy term, no matter when claim is filed
BOP Liability Limits Per occurrence limit:
● Typically $300,000, $500,000, $1 million, $2 million
● Applies per occurrence for bodily injury/physical damage
● Applies per person for personal/advertising injury
BOP Liability Limits General aggregate limit:
twice the per occurrence limit
BOP Liability Limits
Products - completed operations aggregate limit
twice the per occurrence limit
BOP Liability Limits
Damage to premises rented by you:
usually starts at $50,000 per occurrence
BOP Liability Limits
Medical payments:
usually starts at $5,000 per person
Possible limits to liability claims areas follows:
Selected per occurrence liability:$500,000
General aggregate:$1,000,000
Products-completed operations:$1,000,000
Per occurrence (liability and medical expenses): $500,000
Per person (personal and advertising injury):$500,000
Medical payments limit:$5,000
Damages to premises rented by you:$50,000
Supplementary Payments in conjunction with liability include:
● Costs for defending and investigating claims against insured
● Cost of bail bonds when accident involves a vehicle for which bodily injury applies
● Bail bonds and release attachment bonds
● Costs taxed against the insured
● Prejudgment interest
● Interest accrued after judgment, before insurer pays
Liability Exclusions
● Injury caused by legal, medical, pharmacy services
● Expected or intentional injuries by insured, unless defensive
● Employee injuries
● Automobiles, aircraft, watercraft liability
● Contract, liquor, transportation of mobile equipment liability
● Pollutants, war, terrorist attack
● Property of insured, loaned to insured, or in insured’s care
● Property damage to insured’s work, products, data
● Product recall, work recall
BOP Section III: Common Policy Conditions
- Cancellation/Non-renewal
- Changes to Policy
- Concealment, Misrepresentation, Fraud
- Examination of Records
- Inspections and Surveys
- Liberalization
- Premium Notices
- Premium Audit
- Transfer of Right of Recovery
10.Transfer of Your Rights Under This Policy
BOP Section III: Common Policy Conditions
- Cancellation/Non-renewal
Sets rights and duties of both insurer and insured if either cancels
BOP Section III: Common Policy Conditions
- Changes to Policy
Changes must be made by endorsement with the agreement of both parties.
BOP Section III: Common Policy Conditions
- Concealment, Misrepresentation, Fraud
These void coverage.
BOP Section III: Common Policy Conditions
- Examination of Records
Insurer has right to inspect business records up to three years after policy expires.
BOP Section III: Common Policy Conditions
- Inspections and Surveys
Insurer may inspect premises anytime and recommend changes.
BOP Section III: Common Policy Conditions
- Liberalization
Allows insured to be covered for no increased premium if insurer broadens coverage
BOP Section III: Common Policy Conditions
- Premium Notices
Insured must pay all premiums and insurer will send notices to insured.
BOP Section III: Common Policy Conditions
- Premium Audit
Then at end of policy term, insurer audits actual exposure and calculates actual premium
BOP Section III: Common Policy Conditions
- Transfer of Right of Recovery
Subrogation: insured transfers to the insurer the right to collect from third party
BOP Section III: Common Policy Conditions
10.Transfer of Your Rights Under This Policy
Insured cannot transfer rights to policy benefits to another person. If insured dies ,rights can transfer to insured’s legal representative.
A Business Owners Policy’s exclusions are…
open-peril coverage means the insurer must prove any
damage was excluded if a claim is denied.
Therefore, BOP exclusions are thorough
Named peril endorsement changes the BOP from an open-peril policy
to a named-peril policy.
Named peril endorsement Covered perils:
● Fire and lightning
● Windstorm and hail
● Explosions
● Smoke
● Aircraft or vehicles
● Riot or civil commotion
● Vandalism
● Sprinkler leakage
● Sink hole collapse
● Volcanic action
● Transportation, if by…
○ collision, derailment, or overturn
○ stranding or sinking of vessels
○ collapse of bridges, docks, or piers
Note: This endorsement reduces the premium because it makes the BOP cover fewer perils than it normally would.
Protective Safeguards endorsement:
● States that protective devices must be operating in order for coverage to apply
● Insured has 48 hours to notify insurer of problems with protective devices
Utility Services-Direct Damage endorsement:
Covers losses caused by an interruption in utility services if provider is damaged
Utility Time Element endorsement:
Covers lost business income and extra expenses due to loss of utilities caused by covered damage
Hired Auto Liability endorsement
● Adds coverage for rented, leased, and borrowed vehicles
● Covers liability for accidents happening while on business
Non-owned Auto Liability endorsement
Adds coverage for unowned vehicles when used for business, such as a pizza delivery driver who uses his own car
BOP
Business Owner Package:
● Bundles property, liability, and income protection in a single package
● A “homeowner’s policy” for small businesses
Business Owner Package covers
● 12months business income coverage
● 12months extra expense coverage
● Inflation guard for buildings and structures
● Liability protection for lawsuits from accidents or products
● Slander and copyright protection
● Deductibles on most claims
● RC valuation (ACV endorsement option)
● Open-peril coverage (named-peril endorsement option)
BOP Features
● Coverage for company owned vehicles
● Professional liability coverage
● Malpractice coverage
Not typically included in BOP
not technically called “coinsurance,” but works in the
same way:
Policy pays RC if coverage is at least 80% of property’s value
Insurance-to-Value Provision
● Jack has a $400,000 policy on his $1million store
● A vandal breaks Jack’s $10,000 chandelier
○ Replacement cost x(amount of insurance/80% of property value)=
$10,000x ($400,000/$800,000)=$5,000
○ ACV is $2,000 due to depreciation
● Jack’s insurer will pay the higher of the two amounts: $5,000
Insurance-to-Value Example
● Retail sales account for 25% or less of gross income
● 25%or less of floor space is available to general public
Wholesalers and Distributors
BOP qualifications:
● Annual sales are under $3 million
● No more than 25%of sales occur off-premises
Processing and Servicing Businesses BOP qualifications:
● 7,500 square feet or fewer
● Max seating:
○ Limited cooking: 75
○ Fast food: 150
● No liquor sales
● Beer and wine sales no more than 25% annual income
● Maintenance of fire extinguishing equipment
Limited Cooking and Fast Food Restaurant
BOP qualifications:
● Gasoline sales less than 75% annual income
● No auto repair or car wash
● No propane or kerosene sales
Convenience Store
BOP qualifications:
● Maximum of two stories (but floor space not limited)
● No storage of pollutants, waste, chemicals, industrial materials
Self Storage Facility
BOP qualifications:
● Annual payroll no more than $300,000
● Annual sales no more than $3,000,000
● No heavy construction
● Subcontracted work no more than 10% total sales
● No working on buildings over three stories
Specialty Contractors
BOP qualifications:
● Up to three floors
● No bars or cocktail lounges
● Not seasonal
● Not closed more than 30 days per year
Motels
BOP qualifications
● Occupancy must be residential or office
● Incidental occupancy no more than 25,000 square feet
● Incidental occupancy by contractors not exceeding 7,500 s.f. or 15%
Note: Incidental occupants are businesses or offices
Apartment Building and Condominium BOP eligibility:
● Less than 100,000 sq. ft.
● No higher than six stories
● Tenants occupy no more than 25,000 sq. ft.
● Contractors occupy no more than 7,500 sq. ft. or 15% of total sq. ft.
Office Building
BOP qualifications
● Car dealerships, service stations, repair shops
● Parking lots, garages
● Amusement parks
● Bars, nightclubs, and the like
● Banks and similar financial institutions
● Manufacturing, processing, servicing businesses (except those eligible)
● Condominium associations (except residential and office)
Note: No coverage for household personal property with BOP
Ineligible for a BOP:
Property Coverage
BOP Section I:
● Section I- Property
○ Coverage A
○ Coverage B
○ Additional Coverage
○ Extensions to Coverage
● Section II- Liability
○ Coverages
● Section III- Common Policy Conditions
BOP Structure:
Buildings and Structures
Section 1: Property- Coverage A
● Buildings and structures on dec page
● Additions completed or under construction and construction
materials
● Fixtures, equipment, machinery permanently installed
● Building maintenance equipment
● Flooring, floor coverings
● Outdoor fixtures
● Heating, ventilating, refrigerating, cooking, washing equipment
● Owner’s furniture in apartment rented as furnished
Section 1: Property- Coverage A Buildings and Structures
Business Personal Property (BPP)
Section 1: Property- Coverage B
● Furniture belonging to the business
● Loosefixtures, machinery, office equipment, stock
● Other personal property owned and used by business
● Property of others in the custody of the insured
● Improvements made at a tenant’s own expense
● Leased business personal property that must be insured
● Business personal property in the open or in a vehicle 100 feet away
● Value of labor, service, materials arranged for others’ personal property
Section 1: Property- Coverage B Business Personal Property (BPP)
● Currency, stock certificates, bullion
● Vehicles and aircraft that must be registered
● Watercraft while in water
● Contraband and property being illegally shipped or traded
● Land, water, lawns, crops
Excluded, unless covered by policy extension:
● Outdoor antennas
● Outdoor signs
● Trees and other plants
Section 1: Property- Coverage A and B Exclusions
Additional Coverage at no extra charge:
● Inflation guard
● Debris removal
● Preservation of property
● Fire department service
● Business income
● Extra expense
● Pollution cleanup
● Electronic data
● Fire extinguisher recharge
● Fungi, rot, bacteria
● Dependent property
● ICC
● Collapse
● Glass
● Counterfeit money
● Forgery
● Computer interruption
BOP Section I Additional Coverage
Liability
BOP Section II
● Uses the occurrence form: covers damages occurring during policy term, no matter when claim is filed
● Covers liability for bodily injury and property damage from business operations and premises
● Covers product and operations liability
● Has aggregate limits
BOP Section II Liability Coverage in a Business Owners Policy:
covers damages occurring during policy term, no matter when claim is filed
Uses the occurrence form:
● Typically $300,000, $500,000, $1 million, $2 million
● Applies per occurrence for bodily injury/physical damage
● Applies per person for personal/advertising injury
BOP Liability Limits Per occurrence limit:
twice the per occurrence limit
BOP Liability Limits General aggregate limit:
twice the per occurrence limit
BOP Liability Limits
Products - completed operations aggregate limit
usually starts at $50,000 per occurrence
BOP Liability Limits
Damage to premises rented by you:
usually starts at $5,000 per person
BOP Liability Limits
Medical payments:
Selected per occurrence liability:$500,000
General aggregate:$1,000,000
Products-completed operations:$1,000,000
Per occurrence (liability and medical expenses): $500,000
Per person (personal and advertising injury):$500,000
Medical payments limit:$5,000
Damages to premises rented by you:$50,000
Possible limits to liability claims areas follows:
● Costs for defending and investigating claims against insured
● Cost of bail bonds when accident involves a vehicle for which bodily injury applies
● Bail bonds and release attachment bonds
● Costs taxed against the insured
● Prejudgment interest
● Interest accrued after judgment, before insurer pays
Supplementary Payments in conjunction with liability include:
● Injury caused by legal, medical, pharmacy services
● Expected or intentional injuries by insured, unless defensive
● Employee injuries
● Automobiles, aircraft, watercraft liability
● Contract, liquor, transportation of mobile equipment liability
● Pollutants, war, terrorist attack
● Property of insured, loaned to insured, or in insured’s care
● Property damage to insured’s work, products, data
● Product recall, work recall
Liability Exclusions
- Cancellation/Non-renewal
- Changes to Policy
- Concealment, Misrepresentation, Fraud
- Examination of Records
- Inspections and Surveys
- Liberalization
- Premium Notices
- Premium Audit
- Transfer of Right of Recovery
10.Transfer of Your Rights Under This Policy
BOP Section III: Common Policy Conditions
Sets rights and duties of both insurer and insured if either cancels
BOP Section III: Common Policy Conditions
- Cancellation/Non-renewal
Changes must be made by endorsement with the agreement of both parties.
BOP Section III: Common Policy Conditions
- Changes to Policy
These void coverage.
BOP Section III: Common Policy Conditions
- Concealment, Misrepresentation, Fraud
Insurer has right to inspect business records up to three years after policy expires.
BOP Section III: Common Policy Conditions
- Examination of Records
Insurer may inspect premises anytime and recommend changes.
BOP Section III: Common Policy Conditions
- Inspections and Surveys
Allows insured to be covered for no increased premium if insurer broadens coverage
BOP Section III: Common Policy Conditions
- Liberalization
Insured must pay all premiums and insurer will send notices to insured.
BOP Section III: Common Policy Conditions
- Premium Notices
Then at end of policy term, insurer audits actual exposure and calculates actual premium
BOP Section III: Common Policy Conditions
- Premium Audit
Subrogation: insured transfers to the insurer the right to collect from third party
BOP Section III: Common Policy Conditions
- Transfer of Right of Recovery
Insured cannot transfer rights to policy benefits to another person. If insured dies ,rights can transfer to insured’s legal representative.
BOP Section III: Common Policy Conditions
10.Transfer of Your Rights Under This Policy
open-peril coverage means the insurer must prove any
damage was excluded if a claim is denied.
Therefore, BOP exclusions are thorough
A Business Owners Policy’s exclusions are…
to a named-peril policy.
Named peril endorsement changes the BOP from an open-peril policy
● Fire and lightning
● Windstorm and hail
● Explosions
● Smoke
● Aircraft or vehicles
● Riot or civil commotion
● Vandalism
● Sprinkler leakage
● Sink hole collapse
● Volcanic action
● Transportation, if by…
○ collision, derailment, or overturn
○ stranding or sinking of vessels
○ collapse of bridges, docks, or piers
Note: This endorsement reduces the premium because it makes the BOP cover fewer perils than it normally would.
Named peril endorsement Covered perils:
● States that protective devices must be operating in order for coverage to apply
● Insured has 48 hours to notify insurer of problems with protective devices
Protective Safeguards endorsement:
Covers losses caused by an interruption in utility services if provider is damaged
Utility Services-Direct Damage endorsement:
Covers lost business income and extra expenses due to loss of utilities caused by covered damage
Utility Time Element endorsement:
● Adds coverage for rented, leased, and borrowed vehicles
● Covers liability for accidents happening while on business
Hired Auto Liability endorsement
Adds coverage for unowned vehicles when used for business, such as a pizza delivery driver who uses his own car
Non-owned Auto Liability endorsement
