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What Is a Business Owner’s Policy?

A business owner's policy offers the coverage of liability insurance and property insurance in one package.

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Written by: Max Freedman, Senior AnalystUpdated Jul 25, 2024
Chad Brooks,Managing Editor
Business.com earns commissions from some listed providers. Editorial Guidelines.
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On average, a small business might spend thousands of dollars per year on business liability insurance and business property insurance. The average annual cost of business property insurance is $800, while the average annual cost of general liability insurance is $805. But if you’re looking to insure your company, there’s a way you could pay under $1,000 total per year for both these insurance plans: a business owner’s policy (BOP) that protects both your business property and your liabilities.

With a sound BOP in place, you can protect your business against numerous unexpected costs at an affordable rate. Below, we’ll discuss what BOPs cover, which kinds of businesses need these policies, how you can customize your policy and how much you might pay per year for your policy.

>> Read Next: Workers’ Comp Insurance — How Much Do You Need?

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.

Did You Know?Did you know
Not only does a BOP give you all the features of business property and general liability insurance, but its premiums are usually lower than the sum of both.

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:

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.

TipBottom line
If you're concerned you won't be able to afford a BOP despite its more reasonable pricing, check out our guide to saving money on business insurance.

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.

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Written by: Max Freedman, Senior Analyst
For almost a decade, Max Freedman has been a trusted advisor for entrepreneurs and business owners, providing practical insights to kickstart and elevate their ventures. With hands-on experience in small business management, he offers authentic perspectives on crucial business areas that run the gamut from marketing strategies to employee health insurance. At business.com, Freedman primarily covers financial topics, including debt financing, equity compensation, stock purchase agreements, SIMPLE IRAs, differential pay, workers' compensation payments and business loans. Freedman's guidance is grounded in the real world and based on his years working in and leading operations for small business workplaces. Whether advising on financial statements, retirement plans or e-commerce tactics, his expertise and genuine passion for empowering business owners make him an invaluable resource in the entrepreneurial landscape.
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