Business Owners Policy (BOP) Insurance
An insurance plan good for small to medium-sized businesses, BOP packages together elements of General Liability and Commercial Property. Depending on the carrier, a Business Owners’ Policy plan may include elements of Crime Insurance and EPLI.
As a business owner, you’re subject to a lot of liability. So why risk it? Protect yourself with a Business Owners Policy, or BOP, a simple and convenient way to ensure your business’s physical and financial assets are covered.
A Business Owners Policy combines protection for all major property and liability risks in one convenient package. These packages are typically designed for small and mid-sized businesses, and offer a broad range of coverage.
Insurance 101: Business Owners Policy (BOP) - Video
What a Business Owners Policy Is All About:
What Is a Business Owners Policy?
A Business Owners Policy packages together several policies to offer small and mid-sized business owners one convenient policy to protect themselves. It simplifies coverage needs by combining two policies that most businesses need - property and liability - while offering savings over purchasing each policy separately. Business Interruption Insurance is also frequently included in a BOP.
Businesses can tailor a BOP to meet the unique needs of their industry or situation by adding additional optional coverages. One of the most popular optional coverages to add to a BOP is data breach coverage. If your business stores or handles private customer information, you can add coverage to protect yourself in case of a data breach.
What Does a Business Owners Policy Cover?
Property Damage
Property Insurance covers damages to your property, whether that's a building or something you own, from unexpected events.
Example: If a pipe bursts in your store and inventory is ruined, under a BOP you would be covered. Property Insurance can also cover your landscaping, outdoor signage and storefront, your furniture and equipment, your building itself and others' property.
Bodily Injury / Medical Expenses
Bodily injury claims can result from a customer being injured on the premises of your business. This will be covered by a BOP under General Liability.
Example: If a customer slipped and injured themselves in your store, they could sue you for bodily injury.
Lost Income
Business interruption insurance, included in most BOPs, would cover your income for up to 12 months in case you have to suspend operations for a covered reason. This insurance would ensure you won't miss things like rent payments or employee payroll. It would also cover the cost of things like relocation to a new temporary location, and advertising of the new location.
Who Is Covered by Business Owners Policy Insurance?
Business and Employees
Your business and all employees will be covered for claims that arise claiming bodily injury or property damage to a third party caused by the business. Additionally, your business property will be covered, so you can replace it should a covered event happen.
Parties to a Contract
If you enter into a contract for work and a party asks to be listed as additional insured on your policy you can do that here, that way if a claim arises out of your work, they will come to your policy first.
Suppliers
If you sell products or rent a piece of equipment, it is likely that the supplier will ask for you to indemnify them if a claim results with that product or the equipment is damaged.
Do I Need a Business Owners Policy?
Most small business owners should purchase a BOP because it’s the easiest and most affordable way to achieve broad coverage.
A BOP comes in handy if:
- Your business has a physical location, like a store, apartment building or an office. If your business is located outside of your home (or even, in some cases, if it is home-based), you likely should consider a BOP.
- You have assets that could be damaged or stolen. That includes furniture, cash, product inventory and office equipment as well as digital assets, like customer data.
- Your business it at risk for lawsuits. If customers visit your place of work, for example, they could become injured while on the premises and sue you.
- You have less than 100 employees and $5 million in sales.
Many small businesses can benefit from having a Business Owners Policy in place to protect themselves from unexpected financial losses that aren’t covered by General Liability Insurance. The types of businesses that frequently purchase Business Owners Policies include:
- Manufacturers
- Offices
- Religious organizations
- Buildings
- Consumer services
- Apartment buildings
- Restaurants
- Technology consultants and solutions providers
- Wholesalers
- Retail stores
However, not every business is eligible for a BOP. Eligibility requirements vary among insurance providers. Here’s a general overview of what is considered when determining eligibility:
- Certain class of business (eligible classes includes small restaurants, stores, office- or service-based businesses, wholesale distributors, apartments and independent contractors).
- Where you conduct the majority of business operations (most policies require your business to complete most of its business on the premises)
- The size of your business’s primary location
- Your revenue
What Are the “Limits” on a Business Owners Policy?
The limits of a BOP will vary according to the General Liability and Property Insurance policies in your bundle. Business Interruption Insurance typically provides up to 12 months-worth of income for businesses when they are forced to suspend operations due to a covered event. Additionally, you should always read the wording of your policy carefully. Standard policies only provide compensation for damages caused by events specifically listed, such as a fire, smoke damage or vandalism. Your policy may also list certain items as “property not covered” under Property Insurance. However, if you’d like more protection, you can purchase a “special” policy that offers open-peril coverage.
In addition to that...
A Business Owners Policy typically includes three types of insurance: Property Insurance, Business Interruption Insurance and liability protection. There are additional, optional coverages you can add to tailor the policy to fit your business’s specific needs, such as data breach coverage.
Property Insurance insures all types of physical property, from a building you may own or lease to office equipment and product inventory.
Business Interruption Insurance covers the loss of income resulting from a disaster (like a fire) that disrupts the operations of your business. This type of insurance will come in handy when you have the added expense of operating out of a temporary location after a catastrophe, or when you need to continue to meet financial obligations (like rent or payroll) when you had to suspend operations for a covered reason.
Liability Insurance protects your business from lawsuits as a result of things that you or your employees do (or fail to do) that cause bodily injury or property damage to others in the course of business. That could include defective products, mistakes made in servicing a customer and faulty installations. Coverage should also extend to the cost of your defense, since a business can be sued even if it did nothing wrong, and defense can be expensive.
Data breach coverage is frequently added to a Business Owners Policy, and will help you remedy data breach situations as quickly as possibly. This addition would cover the cost of things like notification of impacted individuals, the hiring of a public relations/crisis communications consultant or credit monitoring services.
Data breach coverage is broad, and can even cover you if private data is stored internationally. In addition to the coverage mentioned above, this addition to your BOP could cover defense and settlement costs from resulting lawsuits, replacement of lost income due to a covered data breach, and extortion expenses or ransom payments from attackers. A good policy will also protect your business from data breaches that occurred prior to the policy effective date.
Another additional optional coverage many business owners choose to add to their BOP is Professional Liability/Errors and Omissions Insurance. This type of insurance is important if you provide services for a fee to customers, as they can hold you liable for damages that they believe are the result of an error (or omission) on your part. Even if you’ve done nothing wrong, your business can still be sued by a customer claiming a negligent act. Professional Liability Insurance will cover defense costs in this case.
Some other, less common additional options that can be bundled into a Business Owners Policy include:
- Computer equipment
- Coverage for certain crimes
- Mechanical breakdown
- Forgery and fidelity bond
- Spoilage of merchandise
- Accounts receivable
- Hired/non-owned auto
- Cyber liability
- Inland marine
- Employment practices
- Medical and dental office endorsement
- Eating establishment endorsement
- Lawyers endorsement
- Accountants endorsement
- Increased fine arts coverage
- Earthquake protection
You'll Know It's the Right Policy If It Covers:
- Property insurance
- Business interruption insurance
- Broad liability insurance that covers settlements and defense costs
- Data breach coverage, if relevant
- Professional Liability/Errors and Omissions Insurance, if relevant
- Additional optional coverages specifically suited for your business.
What Does a Business Owners Policy Not Cover?
Employees
If you have employees you need to buy separate policies like Workers Compensation, Health and Disability insurances, which are not covered under a BOP.
Vehicles for Work
If you use a vehicle for work you need to purchase a separate Commercial Auto insurance policy.
Professional Services
If you offer professional services to clients you will need to purchase a separate Professional Liability policy (frequently available as an optional addition to a BOP).
Intentional bodily injury
Intentional bodily injury or property damage when you or your business is at fault.
Liquor liability
It applies if your business manufactures, sells, distributes or serves alcoholic beverages.
Bodily injury
Bodily injury to an employee that results from employment (this would be covered under Workers Compensation Insurance).
Medical expenses
To any person if they are otherwise eligible for coverage under a Workers Compensation Insurance policy, a disability benefits law, or something similar.
How Much Does a Business Owners Policy Cost?
Purchasing a policy bundle is typically more affordable than purchasing General Liability and Property Insurance separately. Most providers will offer a discount of 15 to 20 percent.
The premium for a BOP will be determined based on a number of factors, including your business’s location, risk factors, number of employees and size. Premiums can range anywhere from $500 to $15,000.
Frequently Asked Questions
A business owners insurance policy is designed for small businesses. It is a one-stop-shop kind of policy and for certain medium and large businesses this may not be good because you cannot tailor the coverage to your needs. If you are a manufacturer you should read your coverage carefully and more often than not, get a General Liability policy.
The type of business you own and operate will dictate whether or not certain insurance policies are required by law. While a BOP is not required by law, sometimes General Liability is. Since the BOP is comprised of General Liability and Property it may be the best option for you as far as coverage and price go. Additionally, some professional services like therapists and consultants can be required to purchase Errors and Omissions insurance.
As always, it is important to not only read your policy but to check with an experienced advisor to make sure you have the best policy for your needs. Most BOP’s will be able to provide coverage for independent contractors but that does not mean all of them will. All insurance policies are not created equal.
You can combine different entities as a named insured on your policy if certain requirements are met. This usually includes having similar ownership and similar operations. It is important you check with an advisor as it almost always requires underwriter approval from the insurance company.
If you have the unfortunate need to report a claim you can simply consult with a CoverWalllet advisor to get the process started. We will walk you through the process and save you from all the hassel.
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