What Is a Business Owner’s Policy?

What is a BOP?

BOP is an insurance plan that combines all the features of business property insurance and general liability insurance in one policy. Not only does it give you both types of coverage, but its premiums are typically lower than the sum of standard business property insurance and general liability insurance premiums. BOPs are ideal for obtaining all your recommended business insurance coverage at affordable rates.

What is the difference between general liability and a BOP?

By definition, a general liability policy is part of a BOP. BOPs combine the disparate provisions of general liability and business property insurance into one package.

General liability insurance on its own can only cover costs associated with third-party liability claims, whereas a BOP can cover those costs and property damage costs. As such, you shouldn’t buy a separate general liability insurance policy (or standalone business property insurance) if you obtain a BOP.

What is covered under a BOP?

On the business property side, a BOP usually protects your company against damages or financial losses from property damage. For property damage to be covered under your BOP, it must be due to natural disasters, fires, theft or other occurrences in which your company has no fault.

The property damage portion of BOPs often comes in one of two types: named-peril or open-peril coverage:

• Named-peril coverage: These policies only cover property damage due to events explicitly listed in the policy contract. These might include damage from fires, smoke, wind, explosions and vandalism.
• Open-peril coverage: These policies are broader. As the name suggests, they can cover any unforeseen property damage that neither you nor your employees directly caused.

The property damage portion of your BOP typically will apply to the following properties:

• Buildings your company owns or rents
• Building additions, including those in progress
• Other outdoor fixtures your company rents or owns
• All business-owned items kept within a certain proximity of your company’s premises
• All items owned by a third party but kept in your company’s care within a certain proximity of your company’s premises

On the general liability side, your BOP typically protects your company against the costs of third-party liability claims. These claims include damage to another entity’s property, advertising injuries and personal injuries.

Beyond these coverage categories, you may be able to opt for certain add-ons. For example, given the increasing number of small business cyberattacks in recent years, data breach clauses are becoming more common in BOPs.

You can also add business interruption insurance to your plan. This add-on can cover the costs of significant business disruptions, such as if you have to set up a temporary business location due to extensive property damage.

What is not included in a BOP?

As you learn about what BOPs cover, it’s also helpful to understand what these policies do not cover. BOPs don’t include the following types of insurance:

• Workers’ compensation insurance
• Health insurance
• Disability insurance
• Auto insurance
• Professional liability insurance, which can include errors and omissions insurance

Note that professional liability insurance is not the same as general liability insurance. The former protects against lawsuits alleging your company has been negligent in executing its duties.

Who needs a BOP?

Although no business is legally required to obtain a BOP, most insurance experts strongly recommend it for all small and midsize businesses (SMBs). These policies’ strong reputation comes from their combination of two important business insurance types into one package at a lower cost than if you bought these two policies separately. Put simply, when you take out a BOP, you essentially pay less money for more protection.

Can any company obtain a BOP?

Most SMBs qualify for BOPs, but some insurance providers will only sell business owner’s insurance plans to companies in certain locations. Additionally, your business location’s physical size (not your company size or number of employees), business class and revenue may affect your eligibility. In some cases, your company’s physical size is not a disqualification but just a factor in your plan choices.

That said, your company likely qualifies for BOPs if it handles all its operations on-site. If your company operates out of an office, for example, it likely qualifies. So do most storefronts and apartment buildings. Smaller restaurants may also qualify.

Can you customize a BOP?

Yes, you can customize a BOP. Larger businesses commonly customize their BOPs to address the unique risks that come directly with increased operations.

Of course, SMBs can customize their BOPs as well. Cyber insurance clauses are not automatically included in BOPs, but the increasing threat of SMB cyberattacks is resulting in more businesses customizing their policies to include data breach clauses, as mentioned above. Other clauses commonly added to BOPs provide protection against crime (including forgery), mechanical and/or computer failure, spoiled merchandise and fidelity bonds.

How much does a BOP cost?

Although no one figure for the average cost of a BOP exists, several providers have published their average premiums online. Progressive says that its BOPs usually cost $106 per month on average, although its median monthly cost is $63. Meanwhile, Insureon lists an average monthly premium of $57. 

Insureon also says that 42 percent of its small business customers pay less than $50 per month for a BOP. These figures suggest that finding affordable business coverage is possible. With the breadth of protection that BOPs provide, they can be well worth the investment.

Kimberlee Leonard contributed to this article.