What is a Business Owner’s Policy, or BOP?

The fundamental strength of a BOP is that it is specifically designed with small businesses in mind. The policy was developed by a professional in a way that makes sense for a typical small or medium sized business, so you don’t have to worry so much about what an appropriate level of coverage would be; it’s already taken care of.

A BOP combines most of the coverages that a small business needs in a reasonably broad, logical bundle. Here are some typical elements of a BOP:

• Property Insurance, for buildings, equipment, and inventory;
• Business Interruption Insurance, for lost profits when a loss forces you to close your business for a time;
• Casualty or Liability Protection, for damage to people or their property by your employees or products;
• Crime Insurance, for burglaries, robberies, employee theft, and other losses; and
• Liability Insurance, for lawsuits from accidents on your property or damages caused by your products.

The only major policies that a small business needs that are not in a BOP are workers’ compensation and auto insurance. As a result, it makes the insurance process much simpler, because you’re only buying one plan instead of half a dozen.

This efficiency creates another strength for BOPs. Because there is only the one plan for the insurance company to underwrite, the BOP can be priced very attractively, with a discounted premium for the package compared to buying each policy individually.

While there’s a lot to like about a business owner’s policy, they aren’t perfect. Every business is different, with different circumstances and different needs. As a result, a one-size-fits-all policy like a BOP won’t work for a business that doesn’t fit into the standard box. The policy is designed for a typical small office oriented toward sales or administration. If you run a high traffic retail store, or perhaps a construction company using heavy equipment, you might need more coverage than a BOP can offer. Determine what level of coverage you need, and talk to your insurance agent about modifying the standard package to include policies that meet your requirements. Also, be aware that a BOP will usually not include forms of disaster coverage, like flood insurance, earthquake insurance, and others. If you want these coverages, you’ll need to buy separate policies.

Not every business qualifies for a business owner’s policy. Because they are specifically designed for small and medium sized businesses, there are eligibility requirements your business has to meet. Typically, there is a limit on the number of employees your company can have and the amount of sales revenue your company can bring in. Talk to your insurance company to find out if your company meets their qualifications.