Small business owners want to obtain their commercial insurance in as cohesive and affordable a package as possible. A business owners policy, also known as a BOP, will provide the solution. These policies include coverage for several of the most common liabilities present in most businesses. The plan will pay up to certain limits when compensating the business for a claim.
However, some of the limits of your plan might include deductibles. When you see a deductible on your coverage, that means that you agree to pay for a certain cost of a claim yourself, rather than obligating your insurer to pay. The good news is that you can often use the deductibles with your plan to your advantage, but it will require some attention to detail.
Coverage Within BOPs
BOPs are designed to provide core, foundational commercial insurance to small businesses. Usually, they include:
· Property & Contents Insurance
· General Liability Insurance
· Business Interruption Insurance
Each component of coverage will apply to different types of challenges. For example, if someone gets hurt in your store and sues you, then your liability insurance will pay for that third party’s losses. However, if a fire or storm were to damage company property, then you can file a claim for compensation on your property insurance.
Deductibles will come into play under each sub-section of your BOP. You will most likely find them under your property insurance, though liability insurance generally will not have deductibles attached. When a deductible applies, your BOP will not agree to pay for 100% of your damage costs.
When you choose property insurance deductibles, your give your insurer permission to deduct an amount of money from the total amount they will pay for a claim. You, by default, agree to pay for the value of your deductible yourself.
Suppose that a fire breaks out in your business, causing $5,000 worth of damage to your office space. When calculating your settlement, your insurer will see that you have a $1,000 deductible attached. As a result, they will only pay you up to $4,000 for your losses, since $5,000 minus the deductible value equals $4,000.
Most BOPs include minimum deductibles, and you can choose to increase the deductibles at intervals to suit your own needs. One helpful hint to keep in mind is that by raising your deductible, you might save money on your premiums. This is because by raising your own deductible you will reduce the cost risk you pose to your insurer.
Be careful when arbitrarily raising deductibles, however. This is a cost that you agree to pay for a claim yourself, and any claim that falls below your deductible value will not have coverage from the insurer. Therefore, you must select a deductible you can afford on your own. With the help of your business insurance agent, however, this will be an easy, affordable process.