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When
purchasing insurance or when re-examining existing
policies to make sure coverage is adequate --
it's important that a small company avoid having
too much coverage or too little coverage. The
first wastes money; the second provides inadequate
protection in case of loss. With the wide array
of coverage required today, the best way to keep
coverage at proper levels is to thoroughly understand
what is and is not covered by particular policies. |
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Most small businesses are covered by what
is termed "Business Owner's Policies,"
or BOPS as they are generally known. The type
of coverage protects against a wide variety
of potential losses, including property, liability,
and costs of litigation. Risks that are covered
as standard under most BOPS include:
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1.
Owned buildings and office structures. |
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2.
Business equipment (with additional coverage optional
when a large amount of coverage is required) |
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3.
General office contents, including decorations
and fine art. |
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4. Fire
and theft losses (certain exclusions may apply --
normally flood and earthquake insurance need to
be purchased separately) |
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5.
Personal and business property brought onto the
premises by non-employees.
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6. Liability
costs (medical expenses of non-employees injured
from business operations, lawsuits for injury or
property damage, etc.) |
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7. Business
interruption, lost income (including salaries and
other operating costs) for up to one year. |
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Certain potential losses are not covered by
BOPS -- or potentially are not covered to necessary
limits. Businesses that have exceptionally expensive
equipment, for instance, may need to purchase
add-on coverage. Other risks not normally covered
by BOPS include: financial loss caused by employee
fraud or embezzlement; professional liability
insurance (which covers losses resulting from
errors, omissions or negligence); vehicles (normally
covered by fleet insurance); workers' compensation;
and others.
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Most small businesses can qualify for BOPS.
Generally, companies should have 100 or fewer
employees and gross revenues less than $1 million.
When these limits are exceeded, it's probably
best to consult with insurance professionals
to purchase specific types of policies as required
-- at limits based on the particular needs of
the business. Also, certain types of companies
with high risks or high potential losses may
find it difficult to purchase BOPS.
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Some small companies will find that BOPS do
not offer the limits of coverage required for
certain risks -- and because BOPS cover a wide
range of risks, they do not offer great flexibility.
However, they are normally far less expensive
than purchasing coverage piecemeal.
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