What is a business owner's policy (BOP)?

In a nutshell

A business owner’s policy (BOP) bundles three types of insurance coverage into a single policy: general liability, commercial property and business interruption insurance.

• BOPs are intended for small businesses with fewer than 100 employees or less than $5 million in annual revenue.
• A BOP may be worthwhile if your business has a storefront, office or sells physical products.
• While a BOP can provide your business with sufficient coverage, you may need to invest in additional policies, such as workers’ compensation or commercial auto insurance.

How does a business owner's policy (BOP) work?

Think of a business owner’s policy (BOP) as an insurance package for your startup or small business. It pairs several types of liability and property coverages into a single policy. In most cases, a BOP includes general liability insurance, business property insurance and business interruption insurance.

Keep in mind that your BOP can go beyond these three types of policies; you can customize your policy to meet your particular needs. For example, if your small business depends on a lot of expensive equipment, you may want to add equipment breakdown insurance.

Business owner's policy coverage options

Let’s take a closer look at the three types of coverage that usually come within a BOP.

General liability insurance

General liability insurance is a must-have for all small businesses. If you don’t have it, a lawsuit related to your operations, products or services can lead to hefty out-of-pocket costs and take a serious toll on your venture. General liability insurance is so important that lenders will often ask for proof of general liability insurance when you apply for small business loans.

Some customers or clients may also request it before they do business with you. This type of insurance policy can protect your business from a variety of claims (as well as the costly medical bills and attorney fees they typically entail). These claims may involve bodily injury, property damage, copyright infringement and reputational harm.

Commercial property insurance

Also known as business property insurance, commercial property insurance can protect your real estate and physical assets if they get damaged or destroyed due to a covered event. It’s particularly beneficial if you own or rent an office, building or storefront and depend on expensive equipment and inventory.

While commercial property insurance can kick in and provide coverage for severe weather conditions, such as fire, wind and hail — as well as events like theft and vandalism — it doesn’t cover everything. It won’t apply in the event of employee theft, floods, earthquakes, reputational harm and equipment breakdown.

Business interruption insurance

Business interruption insurance can come in handy if your business has to limit or stop operations after a covered disaster, such as theft or vandalism. If you have recurring expenses and are unable to earn revenue temporarily, business interruption insurance may reimburse you so you can stay open.

This coverage ensures you’ll still be able to pay for operating expenses, such as your monthly mortgage or rent, payroll, taxes and loan payments. It may also cover relocation costs if you’re forced to move to a new location, as well as training costs if your employees need to learn how to use new equipment.

What is excluded from the business owner's policy?

While it’s a comprehensive policy, a BOP doesn’t cover everything. You’ll likely need to buy additional insurance for your business, including:

• Workers' compensation insurance: Most businesses with employees are legally required to invest in workers’ compensation insurance. It covers injuries or illnesses that your workers may face while on the job.
• Professional liability insurance: Professional liability insurance protects your business against claims of mistakes in professional services, even if they have no merit. Also called errors and omissions insurance, it may cover inaccurate or incorrect advice, misrepresentation, negligence and violations of good faith and fair dealings.
• Commercial auto insurance: Commercial accidents insurance will kick in if you or your employees are involved in accidents while driving for business purposes. It’s essential if you have company vehicles.
• Flood and earthquake insurance: Since these natural disasters are typically excluded from standard business insurance policies, flood and earthquake insurance is available. It may make sense if you run your business in an area that’s prone to these severe weather events.
• Employment practices liability: Employment practices liability insurance (EPLI) is designed to shield your business against discrimination claims. These claims may be made based on an employee’s sex, age, race, gender or disability.

Types of businesses that could benefit from a business owner's policy

A BOP isn’t for every business. However, it may be worth the investment for a small business that wouldn’t be able to cover out-of-pocket costs if they’re sued — or have to repair or replace their physical assets. Your business may benefit from a BOP if it:

• Operates in a physical location, such as an office space or storefront.
• Has assets, like products, inventory, furniture and other items that can be stolen.
• Is at high risk for a lawsuit.
• Is situated in an area that’s susceptible to severe weather conditions.

Generally speaking, the types of businesses that pursue a BOP include retailers, restaurants, manufacturers and wholesalers. In some cases, religious organizations and technology consultants may also find a BOP beneficial.

Requirements for a business owner's policy

Your business may be eligible for a BOP if it meets the following criteria:

• Has fewer than 100 employees.
• Earns less than $1 million in annual revenue.
• Operates in a small commercial space or office.
• Works in a low-risk industry.
• Requires less than 12 months of coverage.

Each insurance company has its own unique requirements so shop around and compare your options.

How much do business owner's policies cost?

Fortunately, a BOP is usually affordable. On average, you can expect to pay $57 per month for coverage, according to Insureon. The rate you receive will depend on a number of factors, including your location, industry, number of employees, property value, amount of coverage you purchase, claims history and your deductible. You’ll likely pay more if you operate in a higher-risk industry, have a large number of employees and choose a lower deductible.

Best companies to purchase a business owner's policy from

If you’re in the market for a BOP, here are a few companies to consider:

Next Insurance

Next Insurance sells BOP plans online. You can also purchase other types of business insurance, such as professional liability insurance or workers’ compensation insurance. Once you make a purchase, you can access and share your certificate of insurance digitally. Next is a good option if you’re looking for a digital experience.

State Farm

State Farm is a large insurer that offers BOP, as well as a variety of other policies, like business interruption insurance and contractor equipment coverage. You can work with an agent to find the ideal coverage for your unique budget and business needs.

Progressive

Progressive has a BOP that pairs general liability and property coverage. If you’d like to customize your policy, you can add endorsements for additional coverage, such as workers’ compensation insurance and cyber insurance.

The AP Buyline roundup

A BOP policy is for small businesses with vulnerable assets, legal liabilities and those that can’t continue to operate through interruptions. While most policies combine general liability insurance, business property insurance and business interruption insurance, you can customize your coverage to meet your needs. It’s worth considering if you have fewer than 100 employees or less than $1 million in annual revenue.

Frequently asked questions (FAQs)

What is the difference between a business owner's policy and a commercial property policy?

A BOP usually includes three types of policies: general liability insurance, business property insurance and business interruption insurance. A commercial property policy, however, covers your business assets if they sustain damage by an event like theft or fire.

What is the limit for business income on a BOP?

To be eligible for a BOP, you must earn less than $1 million in annual revenue. You’re also required to operate in a low-risk industry with fewer than 100 employees and have a small office, building or other premises.

What are the advantages of a business owner's policy?

Since a BOP bundles multiple insurance policies, your business will save some money. You’ll also have a single point of contact for questions or claims. Additionally, you can customize your BOP to meet the unique needs of your business.