June 8, 2021

If you are opening a small business, you might be wondering, what is commercial insurance, and do you need it? And, what is the difference between a commercial insurance package and a standard Business Owners Policy? The biggest difference between the two is the extent to which a policy covers your business’s unique activities and risks. 

Learn everything you need to know about the differences between a business owner’s policies and commercial package policies. Find out what commercial packages offer that business owners’ policies do not – and if your business needs the coverage. And, discover how commercial packages customize coverages based on your business’s needs and risks. 

What is a Commercial Insurance Package vs Business Owners Policy (BOP)?

What is a commercial insurance package policy (CPP) and does your business need this type of coverage? Whether or not your business presents a high enough risk to warrant CPP coverage is dependent on the size of your business and the specific risks associated with your business activity. Every small business needs to carry basic coverage, as included with a Business Owners Policy (BOP), but the same is not true for CPP coverage. 

BOP coverage provides three essential forms of protection: property damage, liability, and business interruption insurance. CPP coverage extends to the aspects of your business that are non-standard from other businesses, and present a higher risk. And, a commercial insurance package policy is more affordable for small and medium-sized businesses than purchasing separate policies for each specific need. 

Business Owners Policy (BOP) Explained

Business Owners Policies include the core essentials for just about every small business in any industry. In general, a BOP includes coverage for general liability claims, damage to your business’s property and building, and wages lost as a result of business interruption. Many small businesses in the United States find their BOP perfectly sufficient for their business-coverage, whereas growing businesses and those with specialized risks might need the extended coverage offered by a commercial coverage package policy.

General liability insurance is fundamental for every business and covers the legal costs and court fees associated with third-party claims of damage or injury for which your business is responsible. If your business property gets damaged as a result of vandals, fire, flooding, or other natural disasters, property insurance coverage takes care of the costs. And, in any case, a BOP provides coverage for wages lost due to business interruption, such as property damage. 

BOP coverages are specifically designed to serve the most common needs of businesses, but many areas of the country experience natural events that are not covered by your BOP. For example, businesses operating within hurricane zones of the United States, and areas prone to frequent flooding likely must purchase extended coverage at an additional premium. 

A BOP is great for small businesses that engage in low-risk business operations. Insurers often instill a cut-off limit on the size of a business’s property that they will cover under a BOP. For example, many insurers will not offer BOP property insurance to cover facilities that exceed 25,000 square feet. 

Commercial Insurance Package Policy (CPP) Explained

The most common reason that businesses move from a BOP to a CPP is growth and risk exposure. Whereas a BOP only includes the three fundamental business coverages (property insurance, general liability, and business interruption), a CPP accommodates much more customization to create a policy designed for your unique risks. For example, unlike a BOP, you can create a CPP that bundles professional liability coverage, commercial auto insurance, and many others. A CPP, however, cannot include such coverages as workers compensation, directors and officers insurance, or key person insurance. 

Do You Need a Business Owners Policy or Commercial Package Policy?

Both types of insurance policies provide a way of combining essential coverages into a bundled package to save your business money. And, at the end of the day, you need a policy that provides the coverage you need at a price you can afford. But, being underinsured, you run the risk of further financial losses and burdens than if you take out a CPP. 

So, it all depends on your business’s activity, assets, and risks associated with daily operations. If your business is growing or engages in specialized risks, it is important to purchase a policy that includes the necessary coverage. Talk to an insurance associate for a free consultation on a BOP vs CPP, and to learn more about what a commercial insurance package policy is.