What Is a BOP, and Does Your Business Need One?

Short answer: A business owner's policy (BOP) is a package policy that puts commercial property, business income and general liability coverage into one policy for small and mid-sized businesses. If you own or lease a modest office, shop or similar location and don't need specialty coverage, a BOP is usually the simplest place to start.

The catch is in the details. Not every business qualifies, and a BOP leaves out several coverages that many owners assume are included. Here's what it does, who it fits, and where the gaps are.

What does a BOP cover?

A BOP bundles the core property and liability protection most small businesses need. The Insurance Information Institute and Wisconsin's insurance regulator both describe the same three building blocks:

• Property: your building, if you own it, and the business contents inside it, such as furniture, equipment and inventory. Most carriers offer a standard form and a broader special form.
• Business income and extra expense: lost income, plus the extra cost of operating from a temporary location, when a fire or other covered loss shuts you down.
• General liability: your legal responsibility, including defense costs, when your business causes bodily injury or property damage to someone else.

Depending on the carrier's form, a BOP may also include or offer coverage for other people's property in your care, personal and advertising injury, employee dishonesty, theft of money and securities, and equipment breakdown. Forms differ from one insurance company to the next, so it pays to compare what each one actually includes.

How is a BOP different from buying general liability and property separately?

The coverage inside a BOP is the same kind you could buy as separate policies. The difference is how it's packaged and how much room you have to customize it.

Larger companies often buy a commercial package policy or build a custom program instead. Whether a BOP costs less than separate policies depends on the carrier and your business, so we quote it both ways when both are an option.

Which businesses usually qualify for a BOP?

BOPs were built for "main street" businesses that share similar, predictable risks. Wisconsin's consumer guide describes them as designed for small offices, stores, apartment houses and certain small service and processing businesses.

Each insurance company sets its own eligibility rules. The guide says the key questions are the size of your premises, the liability limits you need, the type of operation, and how much servicing or processing you do away from your location. Industry guidance describes typical carrier appetites along these lines:

• Under about 35,000 square feet of total floor area
• Under about $6 million in annual gross sales per location
• Buildings generally under four stories
• Usually not manufacturing operations

Treat those as rules of thumb, not hard cutoffs. One carrier may say yes where another says no.

Which businesses usually don't fit a BOP?

Businesses with specialized exposures often need coverage built for them. Wisconsin's consumer guide lists restaurants, wholesalers and garages among the categories that typically don't fit a BOP because of their specialized insurance needs. Manufacturers are usually outside a carrier's BOP appetite too.

That line has moved over time. Some carriers now write BOPs for contractors and restaurants, though a restaurant BOP may not include liquor liability. If your business is on the edge, an agent who works with several carriers can tell you quickly whether a BOP is realistic. For those trades, see our contractor, manufacturing and auto repair and garage coverage pages.

What does a BOP NOT cover?

This is where owners get surprised. A BOP does not include:

• Workers' compensation. Injuries to your own employees need a separate workers' comp policy. In Wisconsin, you generally must carry it once you have three or more employees, or one or more employees paid $500 or more in combined gross wages in a calendar quarter; farms follow a separate rule. In Illinois, an employer with even one employee, including a part-time employee, generally must carry it.
• Commercial auto. Vehicles your business owns or uses need a business auto policy.
• Professional liability. Claims that you made a mistake in professional advice or services, often called errors and omissions, need a separate professional liability policy.
• Health and disability insurance for you or your employees.
• Flood and earthquake. These exposures are excluded and need separate coverage if you want it.
• Pollution claims. Wisconsin's consumer guide notes that a BOP excludes pollution coverage.

Two other items are worth checking line by line: not every BOP automatically includes personal and advertising injury, and business income limits are often set too low. Our article on why business interruption limits are often wrong walks through that second one.

Does your business need a BOP?

If you have a physical location, contents worth protecting and customers or vendors coming through your door, you need property and liability coverage in some form. For many small businesses a BOP is the most straightforward way to get it. It may not be the right fit if:

• your business type is outside most carriers' BOP rules,
• you need higher liability limits or special coverage the package can't provide, or
• you've outgrown the size limits as your square footage or sales increase.

Either way, a BOP is only one piece. Most businesses with employees or vehicles will also need workers' comp and commercial auto, and many add an umbrella policy on top. Our business insurance page covers the full picture.

Frequently asked questions

Sources

• Wisconsin Office of the Commissioner of Insurance, Consumer's Guide to Insurance for Small Business Owners (PI-085)
• Insurance Information Institute, What does a business owners policy (BOP) cover?
• Independent Insurance Agents & Brokers of America, Back to Basics: What is the Business Owners Policy?
• Wisconsin Department of Workforce Development, Worker's Compensation Employer Resources
• Illinois Department of Insurance, Workers Compensation Insurance Compliance

This article is general information, not a coverage determination. What your policy covers depends on its actual wording and your carrier's forms.