Business Owner's Policy (BOP): Bundled Coverage Explained

What Is a Business Owner's Policy?

A Business Owner's Policy (BOP) bundles two essential coverages into a single, discounted package:

1. General liability insurance — Covers third-party bodily injury, property damage, and advertising injury claims
2. Commercial property insurance — Covers your building, equipment, inventory, and other business property

Most BOPs also include business income (interruption) insurance as a standard component, covering lost revenue when a covered event forces you to close temporarily.

The appeal of a BOP is simplicity and cost. Buying these coverages together is cheaper than purchasing them separately, and you deal with one policy, one premium, and one renewal date.

Who Qualifies for a BOP?

BOPs are designed for small to mid-sized businesses that meet certain criteria. Insurers typically require:

• Fewer than 100 employees
• Annual revenue under $5 million (varies by insurer)
• Low to moderate risk operations — Retail stores, offices, restaurants, small contractors, professional service firms
• Physical premises — You need a location to insure, though some home-based businesses qualify

High-risk industries — heavy construction, manufacturing, mining — usually do not qualify for a standard BOP. These businesses need individually underwritten policies.

What a BOP Covers

General Liability Component

• Third-party bodily injury (customer slips in your store)
• Third-party property damage (you damage a client's office during a service call)
• Personal and advertising injury (libel, slander, copyright claims)
• Products and completed operations liability
• Legal defense costs

Commercial Property Component

• Building coverage (if you own the structure)
• Business personal property (equipment, furniture, inventory, tools)
• Tenant improvements and betterments
• Signs, glass, and outdoor property
• Loss of business income and extra expenses during covered shutdowns

Common Add-Ons (Endorsements)

A base BOP may not include everything you need. Common endorsements include:

• Hired and non-owned auto liability — For employees using personal vehicles for business
• Employee dishonesty / crime coverage — Theft by employees
• Equipment breakdown — Covers mechanical and electrical failure
• Cyber liability — Data breach and cyber attack coverage
• Spoilage coverage — For restaurants and food businesses
• Professional liability — Some insurers offer this as a BOP add-on
• Umbrella / excess liability — Additional liability limits beyond the base policy

What a BOP Does NOT Cover

Even with endorsements, a BOP has hard limits:

• Workers' compensation — Always a separate policy, required by law in most states
• Commercial auto — Company-owned vehicles need a separate policy
• Health and disability insurance — Employee benefits are separate
• Professional liability — Unless added by endorsement, E&O claims are excluded
• Flood and earthquake — Typically excluded, requiring separate policies

BOP vs. Individual Policies: Which Is Better?

For most small businesses, a BOP wins on both price and convenience:

| Factor | BOP | Individual Policies | |--------|-----|-------------------| | Cost | 15-30% cheaper than buying separately | Higher total premium | | Simplicity | One policy, one bill | Multiple policies to manage | | Customization | Limited base, expandable via endorsements | Full control over each policy | | Coverage limits | Often capped at lower limits | Can purchase higher limits | | Availability | Must meet insurer qualifications | Available to any business |

If your business has complex risks, operates in multiple states, or needs very high coverage limits, individual policies may be the better route. For the majority of small businesses under $5 million in revenue, a BOP provides solid, cost-effective protection.

How Much Does a BOP Cost?

BOP pricing depends on:

• Industry classification — Office-based businesses pay the least; retail and food service pay more
• Location — Urban areas with higher crime and litigation rates cost more
• Property value — The more property you insure, the higher the premium
• Revenue and payroll — Larger operations pay more
• Deductible — Standard deductibles range from $500 to $2,500

Most small businesses pay between $500 and $3,500 per year for a BOP. Compare this to purchasing GL ($400-$2,000) and commercial property ($500-$3,000) separately.

How to Buy a BOP

1. Start with an independent insurance agent — They represent multiple carriers and can compare BOPs across insurers
2. Get at least three quotes — Compare coverage details, not just price
3. Read the declarations page — This is the summary of your coverages, limits, deductibles, and endorsements
4. Check the insurer's AM Best rating — A rating of A- or higher indicates strong financial health
5. Review annually — As your business grows, your coverage needs change. Do not set it and forget it.

Common BOP Mistakes

Assuming the base BOP covers everything. It does not. Read what is included and add endorsements for your specific risks.

Underinsuring property values. If your coinsurance requirement is 80% and you insure for less, your claim payouts will be reduced proportionally.

Ignoring business income coverage limits. Most BOPs include a standard limit for business interruption. If a disaster shuts you down for six months, will that limit cover your overhead? Increase it if needed.

Not disclosing accurate business information. If you understate your revenue, employee count, or square footage, your insurer can deny claims.

The Bottom Line

A BOP is the most efficient way for a qualifying small business to get essential coverage. It bundles general liability, commercial property, and business interruption into one affordable package. Start with a BOP, add endorsements for your specific risks, and supplement with separate policies for workers' comp, auto, and any professional liability needs.