What Is a BOP? The Business Owners Policy Explained

A business owners policy (BOP) is a package policy that combines the three coverages most small and mid-sized businesses need: commercial property, general liability and business income. It usually costs less than buying those coverages separately and includes several extra coverages as standard. Only lower-risk businesses within set size limits can buy one.

If you run a shop, office, restaurant or small contracting business, a BOP is usually the first policy a broker quotes. Many owners assume it covers their whole business. It never does. Here is what is inside the package, which businesses insurers accept, and where a BOP falls short.

What does a BOP cover?

A BOP covers your property, your liability and your lost income after a covered property loss, all on one form: ISO's Businessowners Coverage Form, BP 00 03. The property section covers your building, if you own it, and your business personal property, including furniture, equipment, inventory and improvements you made to leased space.

The liability section works much like a standalone general liability policy. It pays for injuries to customers on your premises and for damage your operations or products cause to other people's property. For more on this part of the BOP, see our guide to what general liability insurance covers.

The third coverage is business income: lost profits and continuing expenses such as rent and payroll while you recover from a covered property loss. Many BOPs include this coverage without a separate dollar limit, a real advantage over a traditional commercial property policy.

Who qualifies for a BOP?

Under ISO's filed eligibility rules, a business qualifies for a BOP if no single location has more than 35,000 square feet of total floor space or more than $6 million in annual gross sales. IRMI uses the same baseline figures in its Businessowners Policy Basics.^[1]

The type of business matters as much as size. Typical BOP classes are offices, retail stores, restaurants, small wholesalers, apartment buildings and artisan contractors. Higher-hazard businesses, such as manufacturers, bars, auto dealers and large contractors, are excluded.

Those figures are a baseline, not a hard ceiling. Each carrier files its own program, and some go beyond those limits to win a good account. A business that outgrows BOP eligibility can buy a commercial package policy (CPP), which combines a commercial property form (such as CP 00 10), a CGL policy and any other coverage the business needs. A CPP takes more work to put together than a BOP, but it has no eligibility ceiling.

What does a BOP not cover?

A BOP never covers commercial auto, workers compensation or professional liability. It is a package, not a force field. A retailer who expects the BOP to cover an injured warehouse employee, a damaged delivery van and bad advice given to a customer would be wrong on all three. The Insurance Information Institute lists these among the things a BOP does not cover:^[2]

• Commercial auto: every vehicle your business owns needs a commercial auto policy. Some BOPs can be endorsed to add hired and non-owned auto liability, but that covers only rented, borrowed and employee-owned vehicles, never vehicles titled to your business.
• Workers compensation: work injuries to employees fall under workers compensation, which nearly every state requires once you hire an employee.
• Professional liability: a BOP covers bodily injury and property damage, not the financial harm caused by bad professional advice. Our guide to professional liability insurance explains the policy that covers it.
• Cyber: some BOPs can be endorsed with basic cyber coverage, but the limits and covered events are narrow. A business that holds customer data should price a standalone cyber policy.

BOP vs buying separate policies: which is better?

For a business that qualifies, the BOP is usually the better buy. Here is how the options compare:

Buy the BOP if you qualify and your exposures are ordinary. Move to a package policy when you need higher property limits or unusual coverage forms, or when your operations no longer fit the eligibility rules.

How much does BOP insurance cost?

Small businesses buying a BOP through Insureon pay an average of about $83 a month, and about a quarter of its customers pay under $50.^[3] Underwriters price a BOP with the same factors used for each coverage inside it and combine them into one premium. On the property side, the factors are building and personal property limits, construction type, location, fire protection class and roof age. On the liability side, they are the class code and a rating basis such as gross sales or square footage. An office is a low-hazard risk and costs much less than a restaurant with similar revenue, which has far more fire and liability exposure. BP 00 03 carries a $500 base property deductible, and raising it toward ISO's higher deductible options is the fastest way to lower the property premium.

Get quotes from at least two or three carriers that want your class of business. Because the liability side is often rated on gross sales, many BOPs have a year-end premium audit, so a strong sales year can bring an extra premium bill after the policy ends. Sometimes the cheapest quote is cheap because its filed form covers less, not because the pricing is sharp. Read the actual form before you accept it.

This guide is for educational purposes and summarizes standard ISO policy language. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.

Is a BOP right for your business?

A businessowners policy bundles commercial property, liability and business income into one package that usually costs less than buying each separately, if your business qualifies. For many small businesses, the BOP wins on price and simplicity. It never covers commercial auto, workers compensation or professional liability, so before you sign, ask your broker which endorsements and separate policies fill the gaps in your operations.