Insurance companies selling business insurance offer policies that combine protection from all major property and liability risks in one package. (They also sell coverages separately.) One package purchased by small and mid-sized businesses is the businessowners policy (BOP). Package policies are created for businesses that generally face the same kind and degree of risk. Larger companies might purchase a commercial package policy or customize their policies to meet the special risks they face. 

BOPs include: 

1. Property insurance for buildings and contents owned by the company -- there are two different forms, standard and special, which provides more comprehensive coverage. 

2. Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location. 

3. Liability protection, which covers your company's legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.

BOPs do NOT cover professional liability, auto insurance, worker’s compensation or health and disability insurance. You'll need separate insurance policies to cover professional services, vehicles and your employees.

There are various "package" policies available. Programs such as the Business Owners Policy (BOP) are
specially designed for small to medium size retail stores, office buildings etc. They are designed to meet the property insurance needs and liability coverage in one contract. Many insurers design packages to meet specialized needs. Such as Auto Garages, Auto Dealers, Jewelers, Furriers, Barbers and Beauty Salons, and Apartment Buildings.

General Liability refers to the legal liability arising out of business operations other than automobile or
aviation accidents and employee injuries. The major general liability loss exposures of a business include the following:

1.Premises and operations
2.Products liability
3.Completed operations
4,Contractual liability
5.Contingent liability

All states have workers compensation laws that require most employers to provide cash and medical benefits for
injured employees. WC benefits are paid regardless of fault. Employers can meet that requirement by buying workers compensation insurance.

Insurance companies evaluate potential policyholders in terms of the risk of loss that they pose. Businesses that appear to be relatively high risks generally will pay more for insurance coverage, and may have trouble obtaining coverage from some companies. Businesses that appear to be relatively low risks generally will pay less for insurance coverage and find it easier to obtain.

Some elements of risk are difficult to control. An explosives factory will almost always be more at risk of loss than a travel agency, for example.

Other risk factors are easier to control. A business property with neat, orderly grounds is much less at risk of fire than one with debris piled next to buildings. In fact, the risk of loss from fire is one of the main factors determining the cost of commercial property insurance. Building or leasing a fire-resistant building can lower a business´s insurance premiums dramatically.

Ratings
Every commercial building receives a rating that reflects its basic risk of loss from fire. That rating is a part of the formula that insurance companies use to calculate commercial property insurance premiums. Buildings with poor ratings cost more to insure; those with better ratings cost less to insure. Fire ratings apply to insurance purchased both by building owners and tenants.

Five basic elements affect a building´s fire rating.

1. Construction. Of what materials is the structure built? Are they fire-resistant? Are they combustible?
2. Occupancy. What businesses use the structure? Are they high-risk or low-risk?
3. Location. Is the property within a city or town with good fire protection? Is it located outside of a city or town, in an area with limited or no fire protection?
4. Exposure. Do other hazards exist within the building or within a specified distance that increase the risk of fire?
5. Fire Protection. Does the building contain sprinkler systems, fire extinguishers and alarms that reduce the risk of fire? What level of public fire protection is available?

Construction

A building´s construction establishes the basis of its fire rating. Using fire-resistant materials throughout a structure makes a big difference in insurance premiums.
Buildings must use fire-resistant materials throughout to receive the full benefit of a good rating. Adding-on to an existing structure can hurt its fire rating. Check with your agent or insurer before building or remodeling.

Internal structural elements affect a fire rating. Filling an otherwise fire-resistant building with wood partitions, floors, and stairways nullifies many of the benefits of its construction. Fire-resistant interior walls, floors, and doors can help preserve a good fire rating.

Occupancy

A building´s use also affects its insurance fire rating. Fire rating schedules list different occupancy and assign each one certain penalties, which are added to the base fire rate determined by the building´s construction. A travel agency has a relatively small effect, since it contains little equipment that could start or feed a fire. A restaurant (with grills or ovens) or an auto repair shop presents greater fire risks and raises the fire rating more.

A critical point to remember: a relatively hazardous occupant affects the fire rating for the entire building, not just for its own section. If your business shares space with a more hazardous occupant, your premiums will be higher than for your business alone.

Location

Location is vital for determining fire protection. Rating schedules assume that commercial property inside a city or town with adequate fire defenses is safer than property located outside of city limits. Property outside a city or town automatically faces a penalty that can double property insurance premiums.

Location and construction together determine another major portion of commercial property insurance known as extended coverage. The Texas Department of Insurance divides the state into different extended coverage territories based on each area´s history of loss from such perils as windstorms, hail, tornadoes, and hurricanes. Properties in areas with histories of high losses generally will face higher rates than equivalent properties in areas of lower risk.

Since a building´s fire rating reflects its general sturdiness as well as its fire-resistance, construction plays a critical part in extended coverage rating. Buildings with good fire ratings receive a lower charge for extended coverage, those with poor fire ratings a higher charge.

Exposure

Exposure measures the extent to which a structure faces external or unusual internal risks.

A building faces external exposure when it is near any other structure, or any potential source of fire, under the assumption fire in the other structure could spread. Any nearby building or other structure raises rates for a property. Hazardous external exposure (such as having a lumberyard or oil storage tank farm next door) raises rates even more.

Internal exposure includes unusual risks within the building itself not already accounted for in the occupancy rating. Unusual risks might include cluttered grounds or storage spaces, special mechanical or electrical equipment, or volatile storage. Extra risks boost fire rates.

Fire Protection

Good internal fire protection helps: installing automatic sprinklers can cut fire rates by as much as 50 percent. Fire extinguishers and automatic fire alarms also lower rates. Rate schedules include certain discounts for particular occupations. A restaurant could receive a discount, for instance, if its grills were equipped with hoods and automatic fire extinguishers.

Good public fire protection also pays off. Each town fire department is assigned a rating, called the key rate, which affects commercial insurance rates for every property within the community´s borders.

Cities with good fire protection have low key rates; those with substandard protection have higher rates. Check with a property insurance agent or with the city fire marshal to find the rate for any city in which you are considering locating a business. Commercial property located within a city but more than 500 feet from a standard city fire hydrant receives an extra charge.

Fire Ratings

Fire ratings are determined through physical inspection. Inspections are done by private inspectors under contract from insurance companies.Inspectors use standard rating systems to determine how a property´s characteristics affect its risk of fire.

Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small businessowner's fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.

1. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.

2. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.

3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Professionals that operate their own businesses need professional liability insurance in addition to an in-home business or business owner's policy. This protects them against financial losses from lawsuits filed against them by their clients.

Professionals are expected to have extensive technical knowledge or training in their particular area of expertise. They are also expected to perform the services for which they were hired, according to the standards of conduct in their profession. If they fail to use the degree of skill expected of them, they can be held responsible in a court of law for any harm they cause to another person or business. When liability is limited to acts of negligence, professional liability insurance may be called "errors and omissions" liability. 

Professional liability insurance is a specialty coverage. Professional liability coverage is not provided under homeowners endorsements, in-home business policies or business owner's policies (BOPs).

As a business owner, you need the same kinds of insurance coverage for the car you use in your business as you do for a car used for personal travel -- liability, collision and comprehensive, medical payments (known as personal injury protection in some states) and coverage for uninsured motorists. In fact, many business people use the same vehicle for both business and pleasure. If the vehicle is owned by the business, make sure the name of the business appears on the policy as the "principal insured" rather than your name. This will avoid possible confusion in the event that you need to file a claim or a claim is filed against you.

Whether you need to buy a business auto insurance policy will depend on the kind of driving you do. A good insurance agent will ask you many details about how you use vehicles in your business, who will be driving them and whether employees, if you have them, are likely to be driving their own cars for your business.

While the major coverage are the same, a business auto policy differs from a personal auto policy in many technical respects. Ask your insurance agent to explain all the differences and options.

If you have a personal umbrella liability policy, there's generally an exclusion for business-related liability. Make sure you have sufficient auto liability coverage.

Flood insurance covers direct physical loss caused by “flood.” In simple terms, a flood is an excess of water on
land that is normally dry. Here’s the official definition used by the National Flood Insurance Program. A flood is (1) “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from a. overflow of inland or tidal waters; b. unusual and rapid accumulation or runoff of surface waters from any source; or c. mudflow*. (2) collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in A.1.a. above.

* Mudflow is defined (in part) as “A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water.”