The Business Owner’s Policy Cost
A BOP or Business Owner’s Policy bundles both general liability and commercial property insurance in a convenient lower cost package. This is the perfect option for most small businesses. Your level of risk, the value of your business property, and your policy limits will affect your costs.
BOP average costs for small business owners
The average cost of a business owner’s policy for our customers is approximately $99 per month* or $1,191 annually. This is before considering the differences in coverage selected. The median premium is $55 per month or $642 per year. Generally speaking, medians eliminate outliers (high and low) to help provide a more accurate indication of insurance costs – at least statistically.
Many small business customers (36%) pay between $400 (or the minimum premium) and $800 per year for a business owner’s policy, and 48% pay between $800 and $1,200 per year.
The numbers may change with different agencies, but these are the premiums paid by customers written with our insurance carrier partners and issued through the IronPoint network of member agencies and and the IronPoint agency.
*The numbers used in this analysis comes from IronPoint Insurance Services and our member insurance agents. We tend to write mostly small to mid-sized businesses. Since we don’t write a lot of large commercial risks, our numbers will differ from state or national results.
Industry risks impact business owner’s policy costs
When buying a BOP we typically think of the general liability coverage. In fact, the general liability insurance portion of a BOP premium is largely, influenced by the business segment or industry your small business operates. Generally, the higher risk your industry represents, the higher premium you can expect to pay. Low-risk business classes enjoy lower avrage premiums.
For example, a busy restaurant is exposed to more risk of customer injury than an management consultant working remotely from a home or an office suite. Alternatively, contractors and retail stores have higher average coverage costs because these types of businesses frequelty have valuable equipment or inventory, as well as increased third-party liability.
*The numbers used in this analysis comes from IronPoint Insurance Services and our member insurance agents. We tend to write mostly small to mid-sized businesses. Since we don’t write a lot of large commercial risks, our numbers will differ from state or national results.
Property value impacts business owner’s policy costs
The commercial property insurance portion of a BOP develops premium is based on property values. Therefore, the cost of this portion of the BOP depends, for obvious reasons, on the value of your business personal property. To a lesser degree, where the property is lcoated and the way you elect to protect it, will also influence the final cost.
Business personal property (BPP) value
When considering the amount of insurance you need for your business personal property, you first need to know it’s value. When you know the value the property owned by the business, you will be able to determin the property limits and select a value that is appropriate to cover the cost of replacing or repairing stolen, lost, or damaged property. Don’t forget to include your inventory!
Location and age
The replacement cost value of your building and its infuence on your premium costs will vary significantly depending on where your business is located. For example, a small restaurant in rural Utah community will typically cost much less to insure than a similar restaurant in Los Angeles, California. Moreover, older buildings are typically more expensive becuase they are more suspesetible to suddent damage (eg. burst pipes).
Replacement value versus actual cash value
The cost of a BOP varies depending on how you choose to insure your business personal property. You can insure it for its replacement value (cost when new), or for its actual cash value (depreciated value). The actual cash value will typically cost much less than full replacement cost. Just as a note, we don’t recommend insuring your property for actual cash value as the savings rarely bare out when you suffer a first-party property claim.
How coverage limits affect insurance costs
If think about your own car insurance premiums, you understand that buying higher limits or more coverage increases you premium. The is true when buying business insurance. If you want a BOP with higher coverage limits, you can expect to pay premium.
The good news when select you liability limit, is that the lower $1 million / $2 million liabilit limit is the most popular selection, and it covers nearly all risks your business may be exposed. This limit of liability covers:
$1 million occurrence limit. While the policy is active and for covered losses, the insurance company will pay up to $1 million to cover any single claim.
$2 million aggregate limit. During the lifetime of a policy (usually one year), the insurance company will pay up to $2 million to cover claims for covered losses.
Which business owner’s policy limits do small businesses choose?
As stated earlier, the majority of customers select the $1 million / $2 million limit. Infact (92%) chose this level of protection when buy throug IronPoint. While 8% of our customers chose a policy with $2 million / $4 million limits, this doesn’t mean you need to. You need to select the limit that matches your companies risk exposure.
What do small businesses pay for different BOP limits?
The average cost of a $1 million / $2 million BOP policy for a small business is approximately $1,200 per year, and the median is $642. A BOP with $2 million / $4 million limits has an average cost of $1,295 per year, and a median cost of $715.
*The numbers used in this analysis comes from IronPoint Insurance Services and our member insurance agents. We tend to write mostly small to mid-sized businesses. Since we don’t write a lot of large commercial risks, our numbers will differ froms state or national results.
Tips for finding business owner’s policy cost savings
Pay your entire premium in-full
Your business owner’s policy will offer several payment options. In some instances, paying the premium in full will provide premium savings or help to avoid monthly service fees. If you need to make monthly payments, or there is no discount for full payment, look to pay the installments electronically. This normally allows you to eliminate or reduce any billing fees.
Manage your business risks
Claims are a certain way to pay more in premium. If you business had no claims, you want to keep up the good work. The best way to do this is to create a comprehensive risk management plan. Things to consdier may be:
- A comprehensive employee training regime
- Invest in theft and fire security systems
- Closely manage your social media practices and employee practices
- Create checklists for your procedures and processes
- Reduce or eliminate the hazards at your facilies