Understanding Deductibles Within BOPs
Small business owners want to get business insurance that is both customized to their needs and affordable. A business owners policy, also known as a BOP, will offer you several essential components of coverage within one package.
However, several components of coverage within the BOP might contain deductibles, which will influence the total settlement that you might receive from a claim. As a result, you must be prepared to accept the cost value represented by the deductible yourself. However, the good news is that you have control over deductible values in the majority of cases.
The Coverage Within BOPs
Because BOPs are packages of commercial insurance, they contain several types of coverage in one place. Usually, the offer:
- Property/Contents Insurance
- Commercial General Liability Insurance
- Business Interruption Insurance
Each benefit will apply to different loss scenarios. For example, if a fire were to damage the business, then property insurance will cover the costs of the repairs. However, if someone were to fall in your bathroom, get hurt and then sue you for their losses, it is liability insurance that will apply.
However, different coverage will only pay up to its limits for the qualifying damage, which might include deductibles. This is a mechanism that is used to free the insurer from certain cost liabilities following a claim. However, they shift this cost burden onto the policyholder.
When you select the deductibles within the different components of your BOP, you will agree to let your insurer deduct a certain amount of money from the settlement they agree to pay you. Instead, you agree to pay this value yourself.
For example, your property insurance might contain a $1,000 deductible. If you file a claim for $3,500 worth of property damage, then your insurer will pay up to $2,500 for your damage, but you will pay the remaining $1,000 as represented by your deductible. If your property damage is less than $1,000 (say $800), then your policy will pay for no damage whatsoever. You only agreed to let them pay for damage that was more than $1,000.
One perk of a BOP is that you have the leeway to choose deductibles that are within your ability to pay. For example, if you choose a $1,000 deductible as opposed to a $500 deductible, then you might actually pay less on your premium.
Choosing a higher deductible shifts some of the cost risk away from the insurer, which offers them the ability to charge you a lower rate. However, you don’t have to choose such a high deductible that you won’t be able to afford the cost on your own.
Therefore, choose your BOP’s deductibles with the help of your commercial insurance agent. They can help you choose the deductible value that offers the best cost-sharing balance between both you and your insurance company.
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