Business owners policy 5% Flashcards by Humberto Suarez

Business Owner Package:

BOP

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Business Owner Package covers

● Bundles property, liability, and income protection in a single package
● A “homeowner’s policy” for small businesses

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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)

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Not typically included in BOP

● Coverage for company owned vehicles
● Professional liability coverage
● Malpractice coverage

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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

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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

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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

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Processing and Servicing Businesses BOP qualifications:

● Annual sales are under $3 million
● No more than 25%of sales occur off-premises

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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

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Convenience Store
BOP qualifications:

● Gasoline sales less than 75% annual income
● No auto repair or car wash
● No propane or kerosene sales

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Self Storage Facility
BOP qualifications:

● Maximum of two stories (but floor space not limited)
● No storage of pollutants, waste, chemicals, industrial materials

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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

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Motels
BOP qualifications

● Up to three floors
● No bars or cocktail lounges
● Not seasonal
● Not closed more than 30 days per year

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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

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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.

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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

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BOP Section I:

Property Coverage

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BOP Structure:

● Section I- Property
○ Coverage A
○ Coverage B
○ Additional Coverage
○ Extensions to Coverage

● Section II- Liability
○ Coverages

● Section III- Common Policy Conditions

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Section 1: Property- Coverage A

Buildings and Structures

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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

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Section 1: Property- Coverage B

Business Personal Property (BPP)

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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

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Section 1: Property- Coverage A and B Exclusions

Excluded, unless covered by policy extension:
● Outdoor antennas
● Outdoor signs
● Trees and other plants

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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

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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

1. Cancellation/Non-renewal 2. Changes to Policy 3. Concealment, Misrepresentation, Fraud 4. Examination of Records 5. Inspections and Surveys 6. Liberalization 7. Premium Notices 8. Premium Audit 9. Transfer of Right of Recovery 10.Transfer of Your Rights Under This Policy

BOP Section III: Common Policy Conditions 1. Cancellation/Non-renewal

Sets rights and duties of both insurer and insured if either cancels

BOP Section III: Common Policy Conditions 2. Changes to Policy

Changes must be made by endorsement with the agreement of both parties.

BOP Section III: Common Policy Conditions 3. Concealment, Misrepresentation, Fraud

These void coverage.

BOP Section III: Common Policy Conditions 4. Examination of Records

Insurer has right to inspect business records up to three years after policy expires.

BOP Section III: Common Policy Conditions 5. Inspections and Surveys

Insurer may inspect premises anytime and recommend changes.

BOP Section III: Common Policy Conditions 6. Liberalization

Allows insured to be covered for no increased premium if insurer broadens coverage

BOP Section III: Common Policy Conditions 7. Premium Notices

Insured must pay all premiums and insurer will send notices to insured.

BOP Section III: Common Policy Conditions 8. Premium Audit

Then at end of policy term, insurer audits actual exposure and calculates actual premium

BOP Section III: Common Policy Conditions 9. 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

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:

Possible limits to liability claims areas follows:

Supplementary Payments in conjunction with liability include:

Liability Exclusions

BOP Section III: Common Policy Conditions

Sets rights and duties of both insurer and insured if either cancels

BOP Section III: Common Policy Conditions 1. Cancellation/Non-renewal

Changes must be made by endorsement with the agreement of both parties.

BOP Section III: Common Policy Conditions 2. Changes to Policy

These void coverage.

BOP Section III: Common Policy Conditions 3. Concealment, Misrepresentation, Fraud

Insurer has right to inspect business records up to three years after policy expires.

BOP Section III: Common Policy Conditions 4. Examination of Records

Insurer may inspect premises anytime and recommend changes.

BOP Section III: Common Policy Conditions 5. Inspections and Surveys

Allows insured to be covered for no increased premium if insurer broadens coverage

BOP Section III: Common Policy Conditions 6. Liberalization

Insured must pay all premiums and insurer will send notices to insured.

BOP Section III: Common Policy Conditions 7. Premium Notices

Then at end of policy term, insurer audits actual exposure and calculates actual premium

BOP Section III: Common Policy Conditions 8. Premium Audit

Subrogation: insured transfers to the insurer the right to collect from third party

BOP Section III: Common Policy Conditions 9. 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

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