In this guide
A business owner's policy (BOP) is a package that combines three coverages many small businesses need: commercial property, general liability, and business income (business interruption) coverage. It is designed for small and mid-sized businesses that meet an insurer's eligibility rules, and it can be simpler and more cost-effective than buying each coverage separately. It does not include everything, though. Workers' compensation, professional liability, and commercial auto are separate.
Key takeaways
- A BOP bundles property, liability, and business income coverage into one policy.
- The Insurance Information Institute (Triple-I) says BOPs are designed for businesses with 100 employees or fewer and revenue of up to about $5 million, though rules differ by insurer.
- Some higher-risk businesses, such as restaurants, may not be eligible for a BOP.
- BOP limits are usually lower than stand-alone policies, so check whether they fit your risks.
- Gaps remain: workers' compensation, professional liability, commercial auto, cyber, and flood are not typically part of a standard BOP.
What a BOP includes
Triple-I describes three core parts. Think of a BOP as a starter package that handles the most common physical and liability risks.
1. Commercial property
Property coverage protects the building or office space you own or lease, along with the business property inside it, such as equipment, furniture, supplies, and inventory. It pays for covered damage from events such as fire, certain storms, theft, and vandalism. Read more in our guide to commercial property insurance.
2. General liability
Liability coverage helps pay legal costs and damages if someone is injured at your business or by your products or services, up to the policy limit. It typically includes bodily injury, property damage, and personal and advertising injury. It does not cover your own employees' injuries or professional mistakes. For the difference with professional liability, see general liability vs. professional liability.
3. Business income coverage
Also called business interruption coverage, this replaces lost income if a covered event, such as a fire, forces you to close temporarily. Most policies also help cover ongoing expenses like rent and payroll during the restoration period, subject to terms and a waiting period. Triple-I notes this is how a BOP can help keep a business running after a covered loss. Details are in business interruption insurance explained.
Good to know: Triple-I notes that additional coverage can often be added to a BOP through endorsements or riders, such as equipment breakdown or certain data-related coverages. What is available depends on the insurer.
Who qualifies for a BOP?
BOPs are meant for smaller operations with lower-than-average risk. Triple-I says they are designed for businesses with 100 employees or fewer and revenue up to about $5 million, and that some businesses, such as restaurants, may be ineligible because of their specific risks and may need to buy coverage separately.
In practice, each insurer sets its own rules, usually based on:
- Type of business and class of operations.
- Number of employees and annual revenue.
- Building size, location, and whether you own or lease.
- Claims history.
Businesses often considered for BOPs include small offices, retail shops, and service businesses. Higher-hazard operations, such as many construction trades, are more likely to need separate policies. Check with the insurer about your type of business.
What a BOP typically does not cover
Triple-I says a BOP does not cover all small-business risks and that BOP coverage limits are usually lower than those of stand-alone policies. Common gaps include:
| Risk | Usually covered by a BOP? | What to look at instead |
|---|---|---|
| Employee injuries and illness | No | Workers' compensation (see workers' compensation explained) |
| Professional errors and advice | No | Professional liability (E&O) |
| Business vehicles | No | Commercial auto insurance |
| Cyber attacks and data breaches | Usually limited or excluded | Cyber liability insurance |
| Flood and sewer backup | Typically excluded | Flood insurance or endorsements |
| Employee practices claims | Usually no | Employment practices liability insurance |
| Liability above BOP limits | No | Commercial umbrella (see below) |
Triple-I also lists computer break-ins, business identity theft, employment practices, health and disability, and terrorism among risks that may need to be considered separately. A commercial umbrella or excess liability policy can raise your liability limits and help cover gaps; see commercial umbrella insurance.
BOP vs. buying policies separately
Triple-I says a BOP can be more cost-effective than buying the same coverages separately because it is a single prepackaged policy. That is not guaranteed. Whether a BOP saves money depends on the insurer, your business and the limits you need.
| Consideration | BOP | Separate policies |
|---|---|---|
| Convenience | One policy, one renewal, one bill | Several policies to manage |
| Customization | Packaged; endorsements allowed | Each policy can be tailored |
| Limits | Usually lower than stand-alone | Can be set higher where needed |
| Eligibility | Restricted by size and industry | Available to more business types |
| Cost | Often lower than buying separately, but not always | Depends on number and types of policies |
Tip: Ask for a side-by-side. Request a quote for a BOP and for the individual coverages you need, using the same limits, so you can compare what is included and what is not.
Key terms to understand
- Limit: the most the insurer pays for a covered loss or claim. Policies often have per-occurrence and aggregate limits.
- Deductible: what you pay before insurance applies to a property loss.
- Replacement cost vs. actual cash value: whether property is paid at the cost to replace it or its depreciated value. See replacement cost vs. actual cash value, which applies the same idea to home policies.
- Waiting period: a delay, often measured in hours or days, before business income coverage starts after a loss.
- Period of restoration: how long income coverage lasts after a covered loss.
How to buy a BOP
- Confirm eligibility. Ask whether your type of business, headcount and revenue fit the insurer's guidelines.
- Estimate your property values. Total the replacement cost of equipment, inventory, and improvements.
- Estimate business income. Consider how many months of income and ongoing expenses you would need covered after a shutdown.
- Choose liability limits. Check contracts and leases for minimums.
- List what is missing. Add workers' compensation, professional liability, commercial auto, and cyber as needed.
- Compare quotes from several insurers for the same coverage, and read the exclusions and endorsements.
- Review yearly. Update values and limits as your business changes.
For the bigger picture of how these policies fit together, see small business insurance: the main types explained. A licensed agent or broker who works with small businesses can answer questions specific to your situation.
Frequently asked questions
What does a business owner's policy cover?
Generally commercial property, general liability, and business income coverage, according to Triple-I. Additional coverage may be available through endorsements.
Is a BOP the same as general liability insurance?
No. General liability is one part of a BOP. A BOP also includes property and business income coverage.
Does a BOP include workers' compensation?
No. Workers' compensation is separate and is regulated by state law. A BOP also does not include professional liability or commercial auto.
Who is not eligible for a BOP?
Eligibility is set by each insurer. Triple-I notes that some businesses, such as restaurants, may be ineligible, and BOPs are generally for businesses with up to about 100 employees and $5 million in revenue.
Is a BOP cheaper than separate policies?
It can be, because it is a packaged policy, but it is not guaranteed. Compare quotes for both approaches.
Sources
- Insurance Information Institute – Understanding business owners policies (BOPs)
- Insurance Information Institute – Small Business Insurance Basics
- U.S. Small Business Administration – Get business insurance
- Insurance Information Institute – Commercial general liability insurance
General information only. This guide explains general concepts and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy documents and speak to a licensed insurance professional or your state insurance department about your situation.