Business Owner's Policy: What Is It, What Does It Cover, and Why Should Your Business Consider One?

If your business involves physical assets like equipment, inventory, or a brick-and-mortar location like an office or retail store, a Business Owner's Policy (BOP) can protect the company you've worked hard to build. It bundles essential coverages, like general liability, commercial property, and business income insurance, into one convenient package.

While a BOP can provide critical protection, it isn't a one-size-fits-all solution. In this guide, we'll explore the key coverages, advantages, and factors to consider when deciding if a BOP is the right fit for your business.

What Is a Business Owner's Policy (BOP)?

A Business Owner's Policy, commonly referred to as a BOP or sometimes called a Businessowners Policy, is a specific type of insurance that targets small and medium-sized businesses. It combines three main coverage areas — general liability, commercial property, and business income insurance — into a single bundled policy.

Rather than juggling separate policies, you get a streamlined policy with well-rounded benefits tailored to meet your business's needs, often at a lower cost than buying individual policies.

What Does a Business Owner's Policy Cover?

Business Owner's Policy insurance provides all-in-one coverage, but the protection you get can vary. Although insurers can customize policies for your specific industry, a typical BOP includes:

• General liability insurance protects against third-party claims of bodily injury, property damage, personal injury (such as libel or slander), and false or misleading advertising. It's helpful coverage if a customer sustains an injury while visiting your business or by a product you sell.
• Commercial property insurance, sometimes called hazard insurance, protects your owned or leased buildings, equipment, inventory, supplies, furniture, and other business assets. It can cover repair and replacement costs from disasters like fire, storms, wind, hail, water damage, and vandalism.
• Business interruption insurance protects your operations if you temporarily close up shop due to a covered loss. It can pay for loss of income, operating expenses like rent and payroll, and extra costs to get your business back up and running after the disruption.

Most policies provide additional protections for small businesses. Some of the other standard benefits bundled into a BOP insurance package include:

• Professional liability insurance for errors and omissions claims
• Data breach for loss/theft of sensitive customer data
• Vehicle coverage for owned vehicles used for business
• Equipment breakdown for mechanical failure of vital equipment

Remember, the exact protections will depend on your specific policy and provider. Reviewing your policy and working with an insurance professional to tailor it to your business's needs is essential.

Business Owner's Policy Exclusions

While a BOP offers rich coverage across several key areas, it's important to note that no insurance policy can protect you from every risk. That said, a BOP has certain limitations on what it won't cover.

Even the most inclusive BOP package will typically leave out safeguards like cyber liability insurance for data breaches and cyberattacks and workers' compensation insurance for employee work-related injuries and illnesses. These specialized policies must be bought separately based on your company's exposures.

Additional Business Owner's Policy exclusions that exist include, but are not limited to:

• Environmental pollution or contamination cleanup costs
• Business downtime from power outages or utility failures
• Floods, earthquakes, or other damage from earth movements
• Employee dishonesty, theft, or fraud by your workers
• Intentional damage, illegal activities, or criminal acts by you or your employees

What Are the Advantages of a Business Owner's Policy?

Adequate insurance protection is crucial for any business, but managing multiple policies can be complicated and expensive. The integrated approach is just one of several advantages of a Business Owner's Policy over buying separate, individual policies.

Potential Cost Savings

A primary benefit of a BOP is the potential cost savings compared to insuring each type of risk individually. Insurance providers can offer bundling discounts and lower premiums because the policy covers a group of coverages tailored for smaller businesses.

Streamlined Support Process

The traditional approach of carrying various standalone policies from different insurers can make the claims process disorganized and confusing. A BOP streamlines this experience by allowing you to file all claims through just one insurer and work with one adjuster or point of contact. This simplified process can expedite approvals and payouts.

More Coverage Options

While the core BOP includes general liability, property, and business income insurance, most providers understand that each small business faces threats beyond these basic protections.

BOPs commonly allow you to customize your policy by adding endorsements or supplemental coverages. This flexibility lets you tailor a single BOP policy package to fit your company's insurance needs.

Business Owner's Policy Eligibility Requirements & Qualifications

Although it's an appealing insurance solution, not every company meets the Business Owner's Policy eligibility criteria.

Generally, a BOP is reserved for smaller "low-risk" operations like service providers, retailers, trade contractors, wholesalers, and professional offices or agencies. To qualify, most insurers require your business to:

• Have 100 employees or fewer
• Generate annual revenues below $5 million
• Operate in lower-risk industries
• Own or lease property or equipment you want to protect

Some occupations and businesses that may be ineligible based on Business Owner's Policy qualifications due to higher risk factors include:

• Manufacturers
• Parking lots or garages
• Amusement parks
• Banks and financial institutions

In these instances, you can get the necessary coverage, but they typically require individual policies instead of a BOP.

Remember that even if your company meets the Business Owner's Policy requirements now, your eligibility could change as your operations grow and evolve. Regular policy reviews are a wise approach to ensuring your protection adapts to changing needs and exposures over time.

How Much Does a Business Owner's Policy Cost?

How much you pay for a BOP can vary significantly depending on factors specific to your company. The average cost of a Business Owner's Policy can range from $300 to $3,500 annually, with most companies paying around $1,000 annually.

Your BOP premium tends to be more affordable if your business is smaller in scale, generates lower revenue, and operates within a less hazardous sector. On the other hand, newer businesses might face higher premiums initially until they establish a track record. Choosing higher policy limits or extra endorsements will also increase your premium, regardless of whether your business is newly established or well-experienced.

Tip: When choosing a BOP for your business, assess your specific threats and coverage needs. Work with an experienced insurance provider who can help you compare policies and customize your coverage. Don't forget to review your policy regularly and update it as your business grows or changes.

Business Owner's Policy vs. General Liability

While both provide essential protection, there is a difference between general liability and a Business Owner's Policy.

General liability insurance is a standalone policy that safeguards your business against lawsuits and other claims arising from your business operations. For example, if a customer slips and falls at your business, you face a lawsuit for reputational harm, or an advertising mistake leads to legal trouble, general liability coverage can step in. It helps cover legal defense costs, settlements, and judgments related to covered claims.

A BOP takes a more holistic approach to protecting your business. It bundles general liability with coverage for your business's physical assets, such as your building or the space you lease, equipment, and inventory. Plus, if an unexpected event forces you to pause operations, a BOP can help replace lost income to keep your business afloat.

Business Owner's Policy vs. Commercial Package Policy

You might think they're similar when considering a Business Owner's Policy vs. a commercial package policy (CPP). However, there's a difference between a Business Owner's Policy and a commercial package policy regarding the types of business they cater to.

A BOP is explicitly designed for small to medium-sized businesses. It has size and revenue limitations a business must meet and is only available for specific low-risk industries. A CPP is more flexible and has a more extensive menu of policy options for companies. It also doesn't have the same eligibility restrictions as a BOP, making it a better fit for larger businesses or those with more complex risks.

Ensure You’re Protected With the Right Business Insurance

Protecting your business with the right insurance is essential for managing hazards and ensuring long-term success. A Business Owner's Policy bundles key insurance benefits, making it a comprehensive, cost-effective solution for many small to medium-sized businesses.

However, a BOP might not meet all your needs. Assess your specific risks and consider additional business insurance coverages like workers' comp or cyber liability insurance to grow your business confidently.