Business owner’s policy for construction businesses: What is it and what does it cover?

Why do construction businesses need BOP insurance coverage?

Construction businesses need BOP insurance because it covers the financial and legal risks of potential liabilities  as well as the cost of repairing a business location damaged by a fire, windstorm or other covered event in one convenient insurance package. 

For example, if a ladder falls onto a homeowner on a job site and they get injured, the general liability portion of a BOP would cover their injuries.

Additionally, a BOP covers damage to construction offices, equipment and tools caused by a covered peril, like a fire, windstorm or break-in. Your BOP will cover the cost of repairing the office and replacing lost business property.

Some examples of construction businesses that can benefit from a BOP include:

• General contractors
• Paving contractors
• Roofers
• Masons
• Carpenters
• Commercial builders
• Residential builders
• Installation contractors

What's covered by BOP insurance

BOP insurance for construction businesses includes general liability insurance and commercial property insurance. Here is what’s covered under this type of policy:

• Third-party bodily injury and property damage: A BOP covers third-party claims for bodily injury and property damage. It will pay for another person’s medical expenses or property damage repairs, and it covers your business’s legal fees if you get used.
• Damage to business property: The commercial property portion of a BOP covers damage to physical business locations and business property due to events like fires, theft, vandalism and accidental water damage. It covers items like construction equipment, tools, computers and furniture.
• Advertising injuries: A BOP covers claims against your business related to advertising injury, which include things like libel, slander and copyright infringement lawsuits. It covers settlements and your legal defense.
• Lost business income: If your BOP policy includes business interruption insurance and your business is forced to shut down temporarily after a covered claim, a BOP will cover lost income so you can pay your rent, utility bills, loan payments and other necessary expenses.

How much is BOP insurance for a construction business?

The average cost of BOP insurance for construction businesses is $1,173 per year, or about $98 per month, according to Insureon. Construction businesses pay more for BOP insurance than many other small businesses because they’re considered higher risk. However, rates depend on numerous factors, including your location, insurance company and business size.

It’s usually cheaper to purchase a BOP than to buy general liability insurance and commercial property insurance separately. Insureon lists the average price of general liability insurance at $735 a year and commercial property at $800 a year.

Additional coverages tailored for a construction business

While many construction businesses can benefit from a BOP, there are other types of insurance that they may need, including:

• Workers’ compensation: Workers’ compensation covers an employee’s medical bills and lost wages if they get sick or injured at work. This policy is required for most businesses with at least one employee.
• Commercial auto insurance: Commercial auto insurance provides liability coverage for business-owned or leased vehicles or work trucks. It’s legally required in nearly every state.
• Professional liability insurance: Professional liability insurance, also called errors & omissions (E&O) insurance, covers claims related to missed deadlines, negligence and breaches of contract that cause financial loss to a client.
• Commercial umbrella insurance: Commercial umbrella insurance extends the coverage limits you have on other liability policies, like general liability and commercial auto insurance.
• Builder's risk insurance: Builder’s risk insurance provides physical damage coverage for structures that are under construction. It also covers materials and equipment stolen from a job site.
• Tools and equipment insurance: Tools and equipment insurance covers business property transported to and from job sites. It pays to replace items damaged by a covered peril or stolen.

Factors that influence BOP costs for construction businesses

BOP insurance premiums are different for every construction business. Some of the factors that can affect the cost of coverage include:

• Location
• Type of construction business
• Business property value
• Claim history
• Coverage limits
• Deductibles
• Number of employees

Benefits of a BOP for construction businesses

These are some of the biggest benefits of a BOP for construction businesses and contractors:

• Provides comprehensive coverage: A BOP combines general liability and commercial property insurance, two of the most important policies for construction businesses. When you purchase a BOP, you get both coverages at a cheaper rate.
• Covers potential third-party lawsuits: BOP insurance protects your business against the financial and legal consequences of third-party bodily injury and property damage claims. Without insurance, these types of claims could have major financial consequences for your business.
• Pays for property damage repairs: If your office or construction equipment gets damaged in a covered claim, a BOP will cover the cost of repairing the building and replacing the items.

How to get the right BOP for your construction business

When shopping for BOP insurance for your construction business, experts recommend you do the following: 

• Find out what’s covered: When comparing BOPs, find out what coverages are included and what policy limits are available. If you aren’t sure how much coverage you need, an agent can provide a recommendation based on your business size, revenue and unique risks.
• Check out each company before purchase: It’s a good idea to read customer reviews to better understand an insurer’s strengths and weaknesses. Pay attention to reviews on claims handling, customer service and policy renewals.
• Ask about discounts: Some insurance companies offer discounts to BOP customers. For example, you might be able to save money by bundling a BOP with another policy or installing smoke alarms and fire sprinklers in your office.
• Shop around: The cost of BOP insurance is different for various construction businesses. To find the most affordable BOP, shop around and compare rate quotes from a few different carriers.
• Understand the exclusions: Every BOP has exclusions. Read the fine print so you know what losses you aren’t covered for. To fill gaps in your BOP, you might need to purchase other types of insurance.

Construction business owner’s policy exclusions

BOP insurance for construction businesses doesn’t cover everything. These are some losses that are excluded under this type of policy:

• Employee injuries and lawsuits
• Accidents in business-owned vehicles
• Property damage caused by normal wear and tear
• Property damage caused by floods or earthquakes
• Intentional or criminal acts
• Professional mistakes or oversights

What our expert says

Q: Why should construction business consider BOP insurance?

Andy Lea Chief insurance officer at Embroker, a digital insurance company.

"For small businesses, a BOP is like having a financial safety net. It covers many potential liabilities associated with running a business such as someone getting hurt on the property and protecting against financial losses from damaged/stolen equipment."