Guides
What is a business owner's policy (BOP)?
A BOP bundles property, business income and general liability for small, lower-hazard businesses. What it includes, what it leaves out and how it is priced.
A business owner's policy, or BOP, is a package that combines commercial property insurance, business income coverage and general liability in a single policy, usually at a lower premium than buying the same coverages separately. It is designed for small and mid-sized businesses in lower-hazard classes: offices, retail shops, salons, restaurants, small contractors and similar. A BOP does not include workers' compensation, commercial auto or professional liability, and each of those needs its own policy.
What is inside a BOP
Insurers sell BOPs on their own filed forms, and many follow the ISO Businessowners program, whose coverage form is BP 00 03 with declarations on BP DS 00. That coverage form combines the property coverages, the liability coverages and the general conditions in one document. Travelers describes its own BOP the same way: it "combines commercial general liability and property insurance" for small businesses, with optional add-ons such as contractors' equipment, hired and non-owned auto, cyber and crime coverage for cash and securities (Travelers). Carrier forms differ, so treat what follows as the usual structure, not a promise.
| Part | What it does | Where to read more |
|---|---|---|
| Building | Covers a building you own, on a special form (open perils) basis, meaning direct physical loss is covered unless excluded | commercial property insurance: what it covers and what it doesn't |
| Business personal property | Covers furniture, equipment, stock, improvements you paid for | tenant improvements and betterments: who insures them |
| Business income and extra expense | Replaces lost net income and pays continuing expenses, plus costs to keep operating, after a covered physical loss | business interruption insurance: how business income coverage works, extra expense coverage explained |
| General liability | Defends and pays third-party bodily injury, property damage, and personal and advertising injury, plus no-fault medical payments | general liability insurance: what it covers and what it does not, Inside the CGL policy: Coverages A, B and C |
| Additional coverages and extensions | Debris removal, fire department service charge, money, employee dishonesty, limited electronic data and similar items, usually with small sublimits | Read the forms list on the policy |
Business income is where BOPs often differ from separate property forms. According to a 2015 Insurance Journal article reposted by United Policyholders, the ISO BOP pays lost business income on an actual-loss-sustained basis for up to 12 months with no coinsurance, limits ordinary payroll to 60 days unless endorsed, and offers 60 days of extended business income after reopening (United Policyholders). The same piece notes an automatic 25% seasonal increase on business personal property, subject to values reported. Editions and carrier forms change these terms, so compare your forms.
The "no coinsurance" feature on business income is a benefit. Many BOP property provisions still require adequate limits. Setting the building and contents limit correctly, and choosing replacement cost rather than actual cash value, matters as much on a BOP as on a stand-alone policy; see insurance to value: setting the right building limit and replacement cost vs actual cash value for business property.
What a BOP leaves out
A BOP is a small-business package, not a complete program. The policy usually does not include:
- Workers' compensation and employers' liability. Required by state law once you have employees. See workers' compensation insurance: how it works.
- Commercial auto. Owned vehicles belong on a business auto policy; see commercial auto insurance: what it covers and what it leaves out. Hired and non-owned auto (HNOA) coverage: what it covers and who needs it may be added to a BOP by endorsement or purchased separately.
- Professional liability. Advice, design and services that fail cause financial-loss claims that general liability does not cover. See Professional liability (E&O) insurance explained.
- Flood and earthquake. Excluded under the standard causes of loss; see Commercial flood insurance: NFIP limits and private options and earthquake insurance for businesses: coverage, deductibles, limits.
- Cyber, employment practices and higher crime limits. Some carriers add limited versions by endorsement or sublimit. Check the amount; see cyber insurance: what it covers for a business and Employment practices liability insurance (EPLI): what it covers.
- Umbrella. The BOP's liability limit is the starting point for commercial umbrella insurance, which sits on top.
Who qualifies
Eligibility is set by the insurer's filed rules, by class of business, and in the ISO program by size measures such as building area and gross sales. Travelers' BOP page lists retail, restaurants, service businesses, contractors, healthcare, technology services and many other classes, but gives no revenue or employee cutoff and says availability depends on underwriting and state rules. Typical reasons a BOP is not offered:
- High-hazard operations (some manufacturing, roofing, bars with heavy liquor sales, hazardous materials).
- A business that has outgrown the size guidelines or has multiple locations with large values.
- Operations with exposures the program excludes, such as heavy products exposure, professional services as the main activity or vehicles as the main activity.
- Poor loss history or vacant property.
When a BOP is not available, the usual alternative is a Commercial package policies: when a BOP is too small approach, which combines separate coverage parts under one policy with more flexibility and a higher price, or separate stand-alone policies.
How a BOP is priced
BOP premiums are built from exposure base and class, then adjusted for location, protection (fire department, alarms, sprinklers), building age and construction, limits, deductibles, loss history and the carrier's credits. Liability is typically rated on sales or payroll, property on values and square footage. Lower price compared to buying property and liability separately comes mainly from package credits and the narrower program the insurer is willing to underwrite. No dollar figure is a safe general estimate; quotes depend on all of these inputs. See how much does business insurance cost, and what drives the price? and how commercial insurance premiums are calculated. Some carriers audit BOP liability premiums after expiration; see premium audits: how they work and how to prepare.
How to read the one you are offered
- Start with the declarations. Check the named insured, the locations, the building and business personal property limits, valuation (replacement cost or actual cash value), the deductible and the liability limits.
- Read the forms list. It lists every form and endorsement with an edition date. Compare to the prior year at renewal.
- Check what is optional. Equipment breakdown, spoilage, utility interruption, ordinance or law, hired and non-owned auto and cyber are often optional or sublimited.
- Check contract requirements. If your lease or a customer requires additional insured status, waiver of subrogation or primary and noncontributory wording, confirm the endorsements exist. See additional insured endorsements explained and how to review the insurance requirements in a contract.
- Ask what is excluded for your class. Carriers attach class-specific restrictions such as limits on liquor, food products or subcontracted work.
A hypothetical example
Say a six-person hair salon rents its space and holds a BOP. The events and outcomes below are invented.
| Event | What happens under a typical BOP |
|---|---|
| A burst pipe damages the salon's chairs, dryers and stock, and the salon closes for six weeks | Business personal property pays for the damaged contents; business income and extra expense respond for lost income and continuing costs |
| A client slips on a wet floor and breaks an ankle | General liability defends and pays covered damages; medical payments may pay the first bills regardless of fault |
| A stylist sprains a wrist at work | Workers' compensation, which is not part of the BOP |
| A client claims a hair treatment caused chemical burns | Liability coverage under the BOP responds if the form covers beauty-service operations; some carriers add exclusions for specific treatments, so read the class endorsements |
| The owner's car is hit while delivering retail stock to a customer | Commercial auto or hired and non-owned auto, not the BOP |
| A flood damages the shop | Excluded under the standard form; flood needs separate cover |
The BOP covers three of six. That is typical, and it is why the BOP is a core policy and not the whole program. Run the What business insurance do I need? to see the rest.
Key takeaways
- A BOP packages property, business income and general liability for small, lower-hazard businesses and is usually cheaper than buying the pieces separately.
- Business income under the ISO BOP is generally actual loss sustained for up to 12 months with no coinsurance, but payroll, extended period and other terms vary by edition and carrier.
- Workers' comp, commercial auto, professional liability, flood and earthquake are outside a standard BOP.
- Eligibility is set by class and size. When you outgrow it, a commercial package policy or separate policies take over.
- Read the declarations and forms list at every renewal, check valuation and limits, and confirm any endorsements your contracts require.