KEY TAKEAWAYS

• A business owner policy (BOP) is a package that bundles basic insurance coverages and is sold at a premium.
• A BOP typically protects business owners against property damage, peril, business interruption, and liability.
• While coverages vary among insurance providers, businesses can often opt-in for additional coverage, such as crime, spoilage of merchandise, forgery, fidelity, and more.
• Insurance providers determine if a business qualifies for a BOP based on business location, the size of the location, the class of business, and revenue.
• A business may qualify for special considerations if it meets certain eligibility qualifications.

Understanding Business Owner Policies

A business owner's policy offers several insurance products rolled into one, generally targeted to small- and mid-size businesses. Business owners’ insurance typically includes property, business interruption, and liability insurance. Yet, most policies require businesses to meet certain eligibility criteria to qualify.

The property insurance portion of a BOP is usually available as named-peril coverage, which provides coverage only for damage caused by events specifically listed in the policy (typically fire, explosion, wind damage, vandalism, smoke damage, etc.). Some BOPs offer open-peril or “all-risk” coverage; this option is available from the “special” BOP form rather than the “standard” type of BOP.

Properties covered by a BOP usually include buildings (owned or rented, additions or additions in progress and outdoor fixtures). The BOP will also cover any business-owned items or items owned by a third party but kept temporarily in the care, custody or control of the business or business owner. The business property must usually be stored or kept in qualifying proximity of business premises (such as within 100 feet of the premises).

With business interruption insurance included in BOP, the insurer covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.

BOPs with liability protection will have the insurance company cover the insured's legal responsibility for damages it may inflict on others. This damage would have to be a result of things done in the normal course of business operations, which may cause bodily injury or property damage due to defective products, faulty installations, and errors in provided services.

The U.S. Small Business Administration (SBA) suggests performing a risk assessment before shopping for a BOP to inform the business owner’s decision when choosing a level of coverage.

Special Considerations

A business owner policy might also include crime insurance, vehicle coverage, and flood insurance. Depending on a business' individual situation, the business owner and the insurance company may decide for additional coverage components. Some of these might include certain crimes, spoilage of merchandise, computer equipment, mechanical breakdown, forgery, and fidelity bond, but the coverage limits for these inclusions are typically low.

A BOP typically does not cover professional liability, worker’s compensation, health, or disability insurance. These items would require separate policies.²