Do small businesses need a business owner’s policy?

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 BOP 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, but 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 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.

Business types 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 with everything in it. 

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 the 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 BOP cost?

A BOP 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

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.

Benefits of a BOP for small businesses

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.

BOP: How it helps 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.

Some examples of how BOP insurance coverage can protect your business include:

• A storage room containing critical company equipment and inventory floods from a sudden pipe burst, 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 from a fire, causing you to shut down your business temporarily. You still have to pay rent and cover your employees’ paychecks while it's being rebuilt.
• One of your employees is on-site at a construction job when they accidentally run into your customer’s building with a forklift, damaging the exterior wall and knocking down shelving and items inside from the impact.

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 various job sites.
• Electronic data processing insurance covers data loss on electronic data processing equipment, such as computers, caused by natural disasters or power surges.
• 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 business buildings and property you own, including equipment, inventory, and office supplies.
• Employee dishonesty insurance covers employee theft.
• 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."