Traditionally, a business owners policy (BOP) offers businesses an excellent alternative to purchasing business income insurance on a standalone basis. While most BOPs still include business income insurance, many providers have taken measures to limit this coverage.
Businesses should pay close attention to renewal policies because changes designed to limit coverage may be present. For example, traditional BOPs include business income coverage on an “actual loss sustained” basis for a specified time period, usually 12 months. One measure taken by some insurance companies to limit this coverage is the addition of a maximum dollar value (policy limit) and a provision that says it will pay the greater of either a time frame—such as 12 months—or the policy limit. A further limitation is that the policy limit may include a coinsurance requirement, thus placing more financial pressure on the policyholder.
Other BOP insurance companies may limit business income coverage available by industry. For example, one insurance company indicated that it is capping coverage for certain manufacturers at 65% of total sales. Others are imposing limits based on the type of equipment that is damaged, such as an expensive press at a commercial printer.
The traditional BOP is changing. For assistance in evaluating changes to your policy, the effect they have on your operations and possible solutions to deal with the changes, give us a call.