What Is Business Owners Policy Insurance?
SmartFinancial Offers Unbiased, Fact-based Information. Our fact-checked articles are intended to educate insurance shoppers so they can make the right buying decisions. Learn More
A business owners policy (BOP) combines general liability insurance, business property insurance and possibly business interruption insurance. BOPs are great coverage solutions for small businesses and mid-sized businesses since they bundle multiple types of essential coverage. Some insurers charge as low as $500 per year for a business owners policy.
Keep reading to see how much business owners insurance costs as well as what isn't covered.
What Is a Business Owners Policy (BOP)?
A business owners policy, or BOP, is a package that bundles multiple types of commercial coverage, including general liability insurance, commercial property insurance and sometimes business interruption insurance. Due to its convenience and relative affordability, BOPs are popular one-stop insurance solutions for small- and medium-sized enterprises.
Get Personalized Business Insurance Quotes Here
Business Owners Policy Coverage Types
BOP insurance offers a wide range of coverage because it roles several insurance types into one policy. Below is a list of what you can expect to be covered with a business owners policy.
General liability insurance provides coverage when you can be held liable for a third party’s injuries or property damages or if you’re sued for reputational harm or copyright infringement.
- Bodily injury protection provides financial help if you are judged legally accountable for the bodily harm caused to a client while they are on your property or if your activities cause a customer to be hurt while you are on their property.
- Property damage coverage protects you if you are held liable for damage to a client's personal property or the property of another business. For example, if a mobile massage therapist accidentally breaks furniture in a client’s home, their BOP would reimburse the client for the actual cash value of the table.
- Reputational harm and copyright infringement coverage protects your company from slander or libel (e.g., an employee says something dishonest or defamatory about another person and they sue you for reputational harm). You’re also covered if you’re sued for allegedly exploiting another person's ideas in your advertisement or product.
Commercial property insurance typically covers damage to a business's buildings and contents, such as equipment and inventory, due to events like fires, theft, storms and explosions. Covered equipment include:
- Computers and other electronics
- Equipment and tools
- Exterior signs
- Fence and landscaping
- Important documents
Business interruption insurance typically covers lost income and extra expenses incurred as a result of a covered event that disrupts normal business operations. For example, if your bakery has to temporarily close down due to a fire, business interruption would pay for payroll, a portion of your revenue, relocation costs and even lease payments.
What Isn’t Covered?
A business owners policy typically does not cover certain types of liability risks or losses. Examples of what a BOP may not cover include:
- Professional liability(errors and omissions): Typically does not cover losses from claims such as mistakes made by an accountant, consultant, lawyer or some other professional.
- Environmental liability: Claims arising from pollution or environmental hazards caused by the business's operations aren’t typically covered.
- Workers' compensation: Business owners insurance plans typically do not cover claims arising from injuries or illnesses suffered by employees while on the job.
- Commercial auto insurance: A BOP typically does not bodily injury or property damage claims caused by company-owned vehicles and operators.
You would need to purchase the above insurance plans to gain protection for these coverage exclusions.
Who Is BOP Insurance Best For?
Business owners insurance plans are typically best for small business owners and medium-sized business owners that have relatively low risk. Some examples of the types of businesses that may benefit from BOP insurance include retail stores, offices and service-based businesses.
Are All Businesses Eligible for BOPs?
Not all businesses are eligible for business owners policies. BOPs are typically designed for small to medium-sized businesses that have relatively low risk. Eligibility for BOPs can vary depending on the specific insurance company and their underwriting guidelines, but generally, businesses that operate in high-risk industries, such as construction or manufacturing, may not qualify for a BOP.
Your business may not qualify for a BOP if you meet the below characteristics:
- History of frequent claims or losses
- Operate in high-risk industries, such as construction or manufacturing
- High amount of inventory or property
- Have a high risk of liability claims, such as a daycare center
In these cases, you may need to buy certain types of coverage as a standalone policy. For example, a daycare center may be required to purchase a standalone general liability insurance plan if they want coverage.
How Much Does BOP Insurance Cost?
BOP insurance will vary in cost depending on multiple factors. Below is a table provided by Fit Small Business breaking down the cost of BOPs by industry.
|Industry (Profession)||Annual Premium Range for $1M Occurrence/$2M Aggregate|
|Handyman||$500 to $4,300|
|Architects||$500 to $3,900|
|Cleaning||$630 to $4,900|
|Beauty Salons||$630 to $3,000|
|Photographers||$500 to $2,900|
|Financial Services||$500 to $1,900|
|Business Consultants||$500 to $2,000|
|General Physicians||$630 to $2,100|
Factors that will determine the cost for coverage include:
- Claims history: Companies that have a track record of filing claims make insurance companies nervous, causing rates to be higher.
- Number of employees: The susceptibility for claims being filed goes up when your business has more employees. The more employees, the higher your rates.
- The value of your property: Expensive property means insurance companies will have to pay more if a covered event occurs and damages your business's assets. This means insurance companies will charge more in order to ensure their losses are covered.
- The terms of your policy: The lower your premium is, the higher your deductible and vice versa.
Additional Coverages Available for BOP Insurance
BOPs are highly customizable and you may add the below coverage options (at an additional cost) to best serve your business’s coverage needs.
- Equipment breakdown insurance: Covers the costs of repairs or replacements for business equipment that breaks down due to mechanical or electrical failure.
- Crime insurance: Losses due to theft, embezzlement or other criminal acts may be covered.
- Flood insurance: Your business's location could leave you susceptible to heavy damages if it’s vulnerable to floods (e.g., store is located by the ocean or a lake).
- Umbrella insurance: This coverage can provide additional liability protection above and beyond the limits of a BOP policy.
- Electronic data: Coverage for harm or theft to a client's electronic data. This coverage could be useful for businesses with access to sensitive data, such as accountants or financial advisors.
- Worldwide coverage: Covers claims brought against you or your company anywhere in the world. Any employee who needs to travel outside of the country on business can be safeguarded.
- Power and utility interruption: Losses caused by power or utility interruptions, such as if a business is dependent on electricity and a power cut occurs.
- Commercial auto insurance: Coverage for accidents related to a company motor vehicle. A personal auto policy will not cover auto accidents that occurred during commercial activity.
Is BOP Insurance Required?
Business owners policy (BOP) insurance is not required by law, but it is strongly recommended for most small to medium-sized businesses.
For example, a business lease may require the business to have liability insurance, while a loan agreement may require the business to have property insurance. Additionally, many businesses are required by law to have certain types of insurance, such as workers' compensation insurance, if they have employees.