Business Owner’s Policy Insurance – 5 Costly Mistakes Small Businesses Must Avoid

Running a small business comes with many risks—some predictable, others unexpected. A Business Owner’s Policy (BOP) can safeguard your company against property damage, liability claims, and income loss during disruptions.

However, many small business owners make costly mistakes that can leave them exposed or paying more than necessary. This guide outlines five common errors and provides practical tips to help you avoid them.

1. Underestimating Coverage Needs

Many business owners assume a standard BOP will cover all risks. But common gaps include:

• High-value equipment or inventory

• Business interruption costs during disasters

• Cyber liability and data breaches

Practical Tip: Conduct a thorough risk assessment. Use a checklist like this guide from the Small Business Administration to identify potential gaps.

2. Ignoring Liability Limits

A BOP bundle combines general liability and commercial property insurance, but some owners opt for lower liability limits to save money.

Risk: A single claim could exceed your coverage, leaving you financially exposed.

Solution: Evaluate:

• Industry-specific risks

• Location-based exposures (like Connecticut’s hurricane zones)

• Number of clients and employees

Consider consulting Insurance Information Institute for guidance on appropriate liability limits.

3. Skipping Add-Ons or Endorsements

Basic BOP policies may not include key coverages:

• Employee dishonesty or theft

• Equipment breakdown

• Professional liability (errors and omissions)

Practical Tip: Review your operations and ask your broker about custom endorsements. For example, restaurants may need spoilage coverage, while tech businesses may need cyber protection.

You can read more about typical add-ons in The Hartford’s BOP Guide.

4. Not Reviewing Policies Annually

Business changes — new products, staff growth, or renovations — can leave your insurance outdated.

Common issues:

• Overlapping coverage with other policies

• Underinsured property after expansions

• Gaps in liability coverage for new services

Practical Tip: Schedule an annual policy review with your broker. Use tools like this Insurance.com policy review checklist to ensure nothing is overlooked.

5. Choosing the Cheapest Option Without Expert Advice

It can be tempting to pick the cheapest BOP, but low-cost policies often:

• Have high deductibles

• Exclude important risks (like flood or hurricane coverage in CT)

• Offer slower claims handling

Practical Tip: Compare options with a licensed insurance broker in Connecticut. Pay slightly more upfront to save thousands in claims later.

For guidance, check National Association of Insurance Commissioners (NAIC) on comparing business insurance policies.

Conclusion

A Business Owner’s Policy is essential, but mistakes can be costly. Avoid:

• Underestimating coverage

• Ignoring liability limits

• Skipping key endorsements

• Neglecting annual reviews

• Choosing the cheapest policy blindly

Action Step: Partner with an experienced Connecticut insurance broker to customize your BOP, protect your assets, and control costs.

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Frequently Asked Questions:

Q1: What is a Business Owner’s Policy (BOP)?

A BOP bundles general liability and commercial property insurance, sometimes including business interruption coverage.

Q2: Does every small business need a BOP?

Most do, especially those with property, employees, or public interactions. High-risk businesses may need extra coverage.

Q3: Can I customize a BOP?

Yes. Endorsements allow coverage for cyber liability, equipment breakdown, employee dishonesty, and more.

Q4: How much does a BOP cost in Connecticut?

Costs vary based on industry, business size, location, and coverage limits. Small offices may pay a few hundred dollars annually; construction or retail businesses could pay significantly more.