Do small businesses need a business owner’s policy?

What is a business owner's policy, or BOP insurance?

A business owner’s policy, commonly known as BOP insurance, bundles three important policies – general liability, commercial property and business interruption insurance – into a package covering common everyday business risks.

General liability insurance covers claims and lawsuits for advertising or personal injuries and property damage your business causes to clients or customers.
Commercial property insurance covers damage claims for your business property, including buildings, machinery, inventory, equipment, office furniture and supplies.
Business interruption insurance covers lost income due to a qualified loss that interrupts your business operations. You can use the funds for expenses like rent, commercial loans, utilities and payroll.

A BOP, typically designed for a small business, can be cheaper than buying these coverages separately. It alleviates the paperwork and administrative burden of dealing with three policies and can be customized to fit your business’s needs.

Andy LaPointe, founder of Traverse Bay Farms, a gourmet and functional fruit products retailer in Bellaire, Michigan, was glad he had BOP coverage for his retail locations after a break-in. Fortunately, his policy included crime and business interruption coverages, “so, with one call to our agent, we were covered [for] the costs to repair damaged windows, walls and missing cash,” he says.

Who needs a business owner's policy (BOP)?

A BOP is a good fit for a small business that:

Rents or owns a workspace
Owns business equipment, inventory, machinery or other assets
Bids on client contracts with underlying liability insurance requirements
Is at risk of client lawsuits
Doesn’t have the capital to cover recurring expenses if a loss temporarily shuts down the business

“Small business owners should consider a business owner's policy – BOP – because it bundles general liability insurance with commercial property insurance and typically leads to lower costs versus purchasing those policies separately,” said Ray Camuy, director of new business sales at small business insurance brokerage Insureon.

But a BOP isn’t available for every company. Only low-risk, small- to medium-sized businesses that meet certain eligibility requirements can get a BOP.

Small business insurance broker Insureon says to get a BOP, a business typically needs to:

Have fewer than 100 employees
Be considered relatively low-risk
Have a small office, workplace or other premises
Make less than $1 million in annual revenue
Require less than 12 months of business interruption insurance

Quick coverage

A business owner’s policy (BOP) provides general liability, commercial property and business interruption coverage in a single policy.
A BOP is a good fit if you rent or own a workspace, own business equipment, inventory, machinery, or other assets, bid on client contracts or interact regularly with the public and would need help covering expenses if your business was shut down for any length of time.
Not every small business is eligible for a BOP.

How to determine if your small business is eligible for a BOP

Two key factors insurance companies use to determine BOP eligibility are size and risk. Here’s a more in-depth look at these two considerations:

Size of the business

Insurance companies offer BOPs to small- and mid-sized businesses, factoring in how many employees you have and your annual revenue to determine eligibility and policy cost. Like business operations, business size requirements can vary by carrier.

Insureon says a typical BOP-eligible business has less than $1 million in revenue. However, the International Risk Management Institute (IRMI), a provider of risk management and insurance information and tools, says companies with less than $6 million of gross sales per year and locations covering less than 35,000 square feet are eligible.

Risk exposure

The more risk exposure your business or industry has, the less likely you are to qualify for a BOP – and, if you do qualify, the more expensive it can be.

Risk exposures that insurance companies look at include:

Your prior claims history
The location of your business
The industry you work in
Crime rates and types in the area
Weather events around your location

The type of business you have and the industry you’re in also factor into BOP eligibility and policy pricing. For example, most insurers offer BOP insurance for:

Retail and e-commerce stores
Cleaning businesses
Personal trainers
Food and beverage businesses
Real estate businesses
Professional, financial, and technology services
Hair and beauty salons

Companies vary as to which industries they offer BOP coverage for, so it’s worth checking with multiple insurers to see which offers the broadest coverage for the best price.

Businesses not eligible for a BOP include auto repair shops, amusement parks, bars, pubs, manufacturers and banks.

Location requirements

In addition to the above eligibility requirements, location is also an insurance consideration. If you own your building, retail space, inventory, and equipment, you’ll need to value each piece of property to ensure you get enough commercial property coverage to replace everything in the event of a total loss, like a fire that destroys your retail or office space.

Common BOP insurance exclusions

Having general liability, commercial property and business interruption insurance in one policy covers a lot. But there are things a BOP typically doesn’t cover, including:

Employee discrimination lawsuits
Injuries to your employees
Destroyed customer payment records
Vehicles you use in your business
Professional errors
Criminal acts
Normal wear and tear
Flood damage

Note that BOP insurance coverage and exclusions vary by insurance company. When you’re comparing BOP quotes, make sure to check what the policy covers and what it excludes. Insurers typically offer endorsements or additional policies that cover what a basic BOP excludes. For example, adding employment practices liability insurance (EPLI) coverage to your BOP provides coverage for legal expenses if an employee sues you for discrimination, wrongful termination or harassment.

How much does a business owner's policy (BOP) cost?

The average cost of BOP insurance with $1 million per occurrence and $2 million aggregate coverage limits costs $57 per month, on average, according to Insureon data.

The cost will vary depending on factors like your:

Business location and value
Industry and professional risk
Number of employees
Policy limits and deductible
Additional coverage added
Value of business property

Case Study

Andy LaPointe

Founder of Traverse Bay Farms

What are some benefits of a business owner's policy?

A BOP can provide several benefits to your small business, including:

A cheaper rate for bundling three policies together compared to buying them individually.
Less paperwork and administration with a single policy and only one insurance company to answer questions, make policy changes and handle claims.
A BOP offers broad coverage for common risks your business may face, such as injured customers, damage to their property and lawsuits.
A BOP is highly customizable, allowing you to add coverages that make sense for your business.

Indeed, beyond the three bundled policy types, you can tailor your BOP insurance policy to meet your specific needs with optional endorsements – or add-ons – such as data breach coverage, professional liability insurance, equipment breakdown insurance, business renters insurance, contractors tools and equipment coverage, electronic data processing insurance, employee dishonesty insurance and liquor liability insurance.

How does a BOP help real small business owners?

BOP insurance can provide valuable financial protection to keep your business running despite a setback like a natural disaster, theft or accident on a job site.

Scenarios where BOP insurance can protect your business include:

A storage room containing critical company equipment and inventory floods after a pipe bursts, damaging your products and equipment.
A customer visits your office and trips over a box, falling and breaking their wrist. They sue for the cost of their medical expenses and lost wages.
The building your retail location is in burns down in a fire, causing you to shut down your business temporarily. You still have to pay rent and cover your employees’ paychecks while rebuilding.
One of your employees is at a construction job when they accidentally run into your customer’s building with a backhoe. The impact damages an exterior wall and knocks down shelving and items inside.

Alternatives to a BOP for your small business

If you don’t qualify for BOP insurance, you can buy general liability, commercial property and business interruption insurance separately. You could also purchase additional coverage to protect your business, including:

Cyber insurance covers technology risks such as cyberattacks or data breaches.
Crime insurance covers securities and money theft.
Contractor’s tools and equipment insurance covers equipment and tools you transport to job sites.
Electronic data processing insurance covers losses caused by natural disasters, fires, power surges and the like. Computers, digital storage devices, smartphones, and the data itself are all covered.
Liquor liability insurance covers bars and restaurants serving alcohol that may be sued for property damage or bodily injury caused by an intoxicated person it served.
Commercial property insurance covers buildings and property you own, including equipment, inventory, and office supplies.
Employee dishonesty insurance covers employee theft and fraud.
Workers’ compensation insurance covers injuries employees receive on the job and usually includes employer’s liability insurance in case they sue you.

What our expert says

Q: Why should small businesses consider a BOP?

Ray Camuy Director of new business sales at small business insurance brokerage Insureon

"Small business owners should consider a business owner's policy – BOP – because it bundles general liability insurance with commercial property insurance and typically leads to lower costs versus purchasing those policies separately."

Frequently asked questions

Is a BOP required by law for small businesses?

No. But if you own or rent business property, including buildings, equipment or inventory, a BOP can provide the coverage a lender or landlord requires. It can also provide the general liability insurance many businesses or contractors need to meet regulatory requirements for professional licenses.

Is a business owner's policy worth it for a solo entrepreneur?

Yes, a business owner's policy (BOP) can be a valuable investment for any entrepreneur, whether a solo proprietor or partnered, because it includes three crucial types of coverage: general liability, commercial property and business interruption insurance. Without these coverages, you could find yourself on the hook for thousands or millions of dollars in claims if your business is found liable for third-party damages. Likewise, if an incident like a fire prevents you from doing business temporarily, the cost of recovery could be prohibitive without business interruption insurance.