A business owners policy (BOP) is insurance that combines multiple coverage types into one single policy. BOP insurance most commonly bundles general liability and commercial property insurance into a package that is less expensive than buying two separate policies. The average cost of BOP insurance is $1,200 per year, but ranges from $500 – $3,500.
BOP Insurance Costs
Other than mitigating risk, the primary reason small business owners should consider buying a business owners policy is cost efficiency. The average cost of BOP insurance is $1,200 per year, but the two coverages most commonly included in the policy, general liability and commercial property insurance, could easily cost $1,500 to $2,000 if bought separately.
BOP Insurance Cost vs. Cost of Buying Separate Policies
|Insurance Policy Type|
|General Liability||Third-party claims for bodily injury or property damage|
|Commercial Property Insurance||Assets owned by the business, such as building, equipment, or inventory|
|Business Owners Policy|
|Combines both general liability and commercial property insurance into one package|
You can expect the cost of BOP insurance to be above average if you have greater risk exposures, such as working out of a physical location with the general public, having employees, or working with dangerous chemicals. Having equipment, tools and valuable inventory can also push rates to the higher end of the range.
BOP Insurance Providers
There are two primary sources of obtaining a business owners policy (BOP): insurance agents and brokers. You may also find insurers that have intimate knowledge of your insurance needs by searching through an industry association, if applicable. To be sure you’re getting the right BOP for your needs, get at least three quotes.
The Hartford is a large national insurance provider that does a great job of catering to the insurance needs of small business owners. The Hartford’s BOP package includes general liability, commercial property insurance, and business interruption coverages. You can also add cybersecurity insurance (data breach) and professional liability (errors and omissions) coverage.
Progressive Commercial is another large insurance provider that serves the small business community, and the BOP is a standard offering in their lineup of coverage types. Progressive’s BOP package includes general liability, commercial property, and professional liability insurance. Small businesses may also add employer practices liability insurance (EPLI), business interruption insurance, and more to their BOP.
AmVenture is proud to call themselves the champion of the small business owner that built their business from the ground up and now wants to protect it. They have a variety of coverage types for small business owners, including their BOP, which includes general liability, commercial property, and business interruption insurance. Although not included in the BOP, AmVenture specializes in workers compensation, which is required for business owners with employees.
Insureon makes insurance easy and hassle-free for small business clients by making the insurance application process simple. After a quick application, Insureon matches your needs with the appropriate coverage and can get you insured quickly. Like most insurance providers, Insureon’s BOP includes general liability, commercial property, and business interruption insurance.
Founded in 1997, TechInsurance is an insurance provider that specializes in IT-related businesses and freelancers. TechInsurance is a broker that works with multiple insurance carriers to bring small business owners the coverage they need at the right price. Their BOP includes general liability and property insurance. TechInsurance also provides cyber liability insurance.
Tips on Applying for BOP Insurance
Insurance coverage requirements for small businesses will vary by industry, location and other factors. Although BOP insurance is a relatively standard insurance product, each policy will be unique to the needs of the small business policy holder. For this reason, knowing how to shop for business owners policy insurance is nearly as important as the coverage itself.
Here are the documents and information to have ready before shopping for BOP insurance:
- Business contact information
- Estimated revenue over the next 12 months
- Extent that you work with the public
- Type and estimated value of equipment, tools and inventory
- Number of years you’ve personally worked in the industry
- Number of years your business has been in the industry
- Details of any other insurance you currently have
- Details about the nature and risk exposures of your work (to what extent you work with the public, hazardous materials, etc.)
- Claims history (at least the past three years)
- Insurance requirements (licensing or requirements for certificates)
Here are the most important things to remember when buying BOP insurance:
1. Know Your Risk Exposures
BOP insurance includes general liability and commercial property insurance coverages. When combined into one business owners policy, some businesses could be sufficiently covered. However, every business has risks that are inherent to their particular industry or business type. Therefore, many business owners may need to add additional coverage types, endorsements, or riders to the policy.
2. Value Might Be More Important Than Price
The most affordable insurance coverage isn’t always the best. You don’t want to be underinsured, nor do you want to buy unnecessary coverage. If it’s determined that the BOP insurance is not sufficient to cover your risk exposures, don’t hesitate to add endorsements or standalone policies, where necessary. Also, higher deductibles and lower limits may reduce premiums but could be costly when there is a claim.
3. Use a Broker Well Versed in Your Industry
A business owners policy is not industry-specific coverage. Therefore, each BOP will not look the same. When shopping for BOP insurance, be sure to seek an agent or broker who understands the specific needs of your business. They can also help you buy the right coverage types with the ideal limits for your particular risk exposure.
4. Provide Accurate Information to Insurance Companies
It sounds obvious, but complete the application and include all information that can tell the insurance agent, broker or underwriter how to best protect your business against risk exposures. Providing accurate and honest information will not only help protect your business but may also prevent you from being denied coverage for a false statement on the application.
How BOP Insurance Works
A business owners policy (BOP) is a bundled package of multiple insurance policies, including commercial general liability, commercial property insurance and usually business interruption insurance. The main advantages of a BOP for small business owners are that it provides broad protection and the bundle of policies often costs less than if the underlying policies were bought separately.
What Business Owners Policy Insurance Covers
|Type of Claim||What It Covers|
|Bodily Injury||Third-party medical expenses and related costs||A customer slips and falls on your premises and they sue you to cover their medical bills. The general liability portion of the BOP would cover this.|
|Third-Party Property Damage||Damage to a third-party’s property||A fire that started in your office damages the building and the landlord sues you. The commercial property insurance portion of the BOP would cover your damaged assets and the general liability portion would cover the landlord’s losses.|
|Property Damage and Theft of Your Assets||Damage or theft of assets owned by your business||A thief breaks into your building, damages your front door, and steals some of your inventory. The BOP would cover the door and the inventory.|
|Business Interruption Insurance||Loss of income due to suspension of operations after a claim||A pipe bursts in your building and your business can’t operate until the water damage is repaired, resulting in loss of revenue.|
These are the primary types of claims that a business owners policy (BOP) covers; however, there are other coverage types that can be included in your BOP. Keep in mind that coverage limits will also vary based upon your needs to cover risk exposures. In addition, a BOP is typically purchased through one insurance provider, not multiple insurance companies.
There are typically three insurance types included in a BOP, although some insurance providers may include other types:
1. Commercial General Liability
General liability insurance coverage protects against third-party claims for bodily injury or property damage. If you work with the public, and especially if you work out of a building you own or lease, you’ll need a GL policy. Liability claims may be your greatest financial risk, which makes general liability an important coverage type for small businesses.
2. Commercial Property Insurance
Commercial property insurance covers assets, such as your building, equipment, or inventory. If all you own is a laptop, you have an asset worth covering. You’ll protect property either at current value or replacement cost. Current value replaces at market value and has lower premiums, whereas replacement cost replaces with new property but has higher premiums.
3. Business Interruption Insurance
Business interruption insurance covers a loss of income when a covered claim causes suspension of business operations. For example, a fire or a burst pipe can do damage to your building, making it impossible to do your main line of work for a brief period of time. Most insurance companies will not cover more than 12 months of income replacement.
According to Hannah Sullivan, Pogo Insurance:
“The great thing about a BOP is that it’s a packaged policy. You get both general liability and commercial property coverage, and at a lesser cost than buying each policy separately. Another bonus to this policy is that it’s very easy to add on an assortment of endorsements, allowing you to customize additional coverage, if desired. BOP insurance is best for small businesses with little risk of injury, such as those based in an office. ”
Other Coverages That May Be Included in a BOP
Business owners policies are relatively standardized throughout the insurance industry. This means that all BOPs generally cover the broad insurance types of general liability and commercial property insurance. However, there are other coverage types that can be included in a BOP package. These are additional policies that are complementary to the BOP but not always included.
For example, many insurance companies offer a BOP with just the standard general liability and commercial property insurance included. Some insurance companies include other liability coverages in the BOP. However, if a particular coverage type is not part of the package, the insurance company can add coverage types, called “endorsements” or “riders.”
Here are examples of coverage types that can be included in a BOP or added as an endorsement or rider if they are not already included:
- Cyber Liability Insurance: A good BOP will include protection for loss in the event of a data breach, which is risk exposure to almost every business.
- Professional Liability (Errors and Omissions) Insurance: Covers legal costs of claims arising from injuries to your clients as a direct result of the service you are providing. This coverage also includes injuries or damages caused by giving incorrect advice, an omission (leaving something out), or failing to deliver on a contract.
- Inland Marine Insurance: This covers materials in transit, whereas the standard BOP only covers property on your premises. So, if you transport property, such as your equipment, tools or goods to be delivered to customers, Inland Marine would be a smart endorsement to a BOP.
- Spoilage of Merchandise: BOP insurance will typically cover damage or theft to inventory but make sure it includes spoilage, if applicable to your business.
- Accounts Receivable: This would cover your business if you were unable to collect payment from a customer for some particular reason.
- Earthquake Protection: If your business is located near an earthquake fault line, look for this coverage in your BOP.
According to Travis Biggert, Hub International:
“A BOP is a great starter policy that includes numerous coverage options into one package. One of the main benefits of a BOP policy is that most of them come with what is called Actual Loss Sustained coverage relative to a loss of business income. A BOP will also include numerous additional coverages that businesses need. Some of these coverages include crime and vandalism, and some even carry a small amount of coverage for claims brought by employees, such as sexual harassment.”
If there are risk exposures that are specific to your business or industry, be sure to inquire if they can be included in your BOP. If the risk is not covered in the BOP, your insurance agent or broker can add the coverage type. When coverage needs to be added to a policy, it’s called an endorsement or a rider.
What’s Not Covered in BOP Insurance
A business owners policy (BOP) is a good foundation for small business insurance coverage and is sometimes sufficient to meet all the insurance needs of a business. However, there are often other coverages that business owners may need but are not included in BOP insurance. Therefore, it’s important to know what’s not covered in your BOP.
Here are the main coverage types not included in BOP insurance:
- Professional Liability Insurance: Sometimes referred to as “errors and omissions” coverage, this covers damages due to your failure to provide the services that you were contracted to do or if you make mistakes in providing the contracted services.
- Commercial Vehicle Insurance: This covers injury, damage and lawsuits arising from accidents involving vehicles owned by your business.
- Workers Compensation: This covers work-related injuries, medical bills, and wage replacement arising from claims due to accidents involving employees while on the job.
- Health Insurance: If you or an employee is sick or injured, your business owners policy will not cover this.
- Business Overhead Expense: Also known as Business Expense Insurance, BOE covers overhead costs while the business owner is disabled.
According to Steven Crawford, Disability Insurance Quotes:
“One type of coverage most small business owners don’t think about is a Business Overhead Expense disability insurance policy. Many small business owners really are the business, meaning that if they cannot work, then the business is not generating any income. A BOE policy will reimburse a business owner for their overhead expenses during a period of disability.”
Who Needs a Business Owners Policy
All small businesses that work with the public and own valuable assets need a business owners policy (BOP). Even if you don’t own a building and work out of your home, you may still be at risk of injuring a third party and you may have assets, such as tools, equipment or inventory, that need to be protected.
You may need a BOP insurance policy if your business:
- Works out of a small office, workplace or other premises
- Has less than 100 employees
- Has less than $1 million per year in revenue
- Won’t need more than 12 months of Business Interruption Insurance coverage
- Has a physical inventory or stored goods
- Is not in a high-risk industry
- Owns assets that are costly to repair or replace
The general liability portion of the BOP will cover third-party bodily injury and property damage and the commercial property insurance portion will protect your business assets. Those two primary coverage types are bundled into one BOP, and this combination covers most small business’ insurance needs. This two-policy combination costs less than buying each coverage type separately.
According to the Insurance Information Institute (iii), BOP insurance is a standard insurance coverage type for small business owners. This is because most small businesses will need at least some form of insurance coverage, and the two most common coverage types are general liability and commercial property insurance, both of which are included in a BOP.