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Form BP APPL: Businessowners Application

The Businessowners Application (BP APPL) is a foundational document used by insurance companies to gather essential information from businesses seeking a Businessowners Policy (BOP). Its primary purpose is to collect the necessary data for underwriters to assess the risks associated with insuring the applicant's business and to determine eligibility and appropriate premium for the BOP. This application typically includes details about the business's operations, location, ownership structure, financial information, and insurance history. The completed and signed application becomes a legal document and part of the insurance contract if a policy is issued.

Classes of Business

A Businessowners Policy, and therefore the BP APPL form, is generally designed for small to medium-sized businesses with lower risk profiles. While eligibility criteria can vary by insurer, common classes of business that utilize this application include:

• Retail Stores: Such as boutiques, bookstores, hardware stores, and florists. For example, a local gift shop would use this application to obtain coverage for its inventory, premises, and liability risks.
• Office-Based Businesses: Including accounting firms, law offices, consulting services, and real estate agencies. An IT consulting firm with a small office space would complete this form.
• Service Businesses: Such as barber shops, beauty salons, repair shops (e.g., computer or appliance repair), and dry cleaners. A neighborhood hair salon would use the BP APPL to apply for coverage.
• Small Restaurants and Cafes: Typically those with limited cooking exposures (e.g., no deep-fat frying or minimal table service). A small coffee shop or a sandwich deli are good examples.
• Artisan Contractors: Certain types of contractors with limited off-premises exposures and smaller operations, like electricians or plumbers, may be eligible.
• Wholesale Businesses: Some smaller wholesale distributors may qualify.
• Apartment Buildings and Condominium Associations: Residential building owners can also use a BOP.

Generally, businesses that employ fewer than 100 people, have annual revenues under a certain threshold (e.g., $1 million to $5 million, though some insurers like Chubb go up to $30M), and occupy a relatively small commercial space are good candidates for a BOP.

Special Considerations

There are several important factors to consider when dealing with the BP APPL and the Businessowners Policy:

• Eligibility Requirements: Not all businesses qualify for a BOP. Insurers have specific underwriting guidelines regarding the type of business, size of operations (square footage, revenue, number of employees), location, and the nature of risks. For instance, businesses with high-risk operations (e.g., bars, manufacturing with hazardous materials, businesses with significant off-premises operations) are often ineligible. Some insurers may have limitations on businesses operating primarily from home.
• Completeness and Accuracy: The information provided on the BP APPL must be accurate and complete. Misrepresentations or omissions can lead to denial of claims or cancellation of the policy. For example, failing to disclose a prior history of significant property losses could jeopardize coverage.
• Coverage Limitations: While a BOP bundles common coverages like commercial property, general liability, and business interruption, it doesn't cover everything. Professional liability, commercial auto, workers' compensation, and certain specialized risks (e.g., flood, earthquake unless endorsed) are typically excluded and require separate policies or endorsements. For example, a consultant providing advice would need a separate professional liability policy as the BOP won't cover errors and omissions.
• Endorsements: BOPs can often be customized with endorsements to add or modify coverage for specific needs, such as data breach, equipment breakdown, or spoilage of perishable goods. An agent should discuss these options based on the applicant's specific exposures.
• "Main Street" Businesses: The BOP is often best suited for what are considered "main street" businesses with predictable risks.

Key Information for Agents and Underwriters

The BP APPL is a critical tool for both agents and underwriters in the BOP placement process:

• Risk Assessment: Underwriters meticulously review the application to understand the nature and extent of the business's risks. Key data points include the description of operations, construction of the building, fire protection (e.g., sprinklers, alarms), security measures, claims history, and financial stability. For example, a restaurant application will be scrutinized for cooking methods and fire suppression systems.
• Pricing: The information on the application directly impacts the premium. Factors like location (e.g., proximity to flood zones or high-crime areas), construction type, occupancy, claims history, and desired coverage limits all influence the final price. A business with a clean loss history and robust safety measures will generally receive more favorable pricing.
• Identifying Coverage Gaps: Agents use the application process to identify potential coverage gaps. By understanding the client's operations, an agent can recommend necessary endorsements or additional policies (e.g., cyber liability if the business handles sensitive customer data, or hired and non-owned auto if employees use personal vehicles for business).
• Underwriting Guidelines: Insurers have specific underwriting guidelines that dictate which risks are acceptable for a BOP. The application helps determine if the business fits within these parameters. For example, an underwriter will check if the business's annual revenue or square footage exceeds the insurer's maximum limit for BOP eligibility. They also assess management experience and financial stability.
• Loss History Analysis: Past claims detailed on the application (or through separate loss runs) are a significant indicator of future risk. Multiple small claims or a single large claim can make a risk less desirable or lead to higher premiums or specific exclusions.

Thorough completion and review of the BP APPL are essential for ensuring the business obtains appropriate coverage and for the insurer to accurately price and underwrite the risk.