What is a business owners policy (BOP) and who needs one?

The Business Owners Policy was developed as a convenient, cost-effective package for small businesses that have both premises liability exposure and business property to protect. The Insurance Information Institute describes a BOP as combining property insurance and liability protection in a single policy — typically at a lower combined price than purchasing each coverage separately.

What a BOP typically includes

• Commercial general liability (CGL): Third-party bodily injury, property damage, personal/advertising injury, and legal defense costs — the same coverage as a standalone CGL policy.
• Commercial property: Covers the business's physical assets — building (if owned), furniture, equipment, inventory, and improvements to leased space — against covered perils (fire, theft, vandalism, windstorm).
• Business income (interruption): Most BOPs include business income coverage, which replaces lost revenue and pays ongoing expenses (payroll, rent) if a covered loss forces you to temporarily close.
• Extra expense: Covers additional costs (temporary location, rush equipment rental) incurred to keep the business operating after a covered loss.

What a BOP does NOT include

A BOP is not an all-in-one policy. Key coverages not included in a standard BOP:

• Workers' compensation: Required by most states for businesses with employees — must be purchased separately.
• Commercial auto: Business vehicles require separate commercial auto coverage.
• Professional liability (E&O): Errors and omissions coverage for professional advice or services is not part of a standard BOP.
• Flood and earthquake: Like homeowners policies, BOPs exclude flood and earthquake damage — separate policies are required.
• Health or life insurance: Employee benefits coverage is entirely separate.

Who qualifies for a BOP?

Insurers offer BOPs to businesses that fall within certain eligibility criteria: typically fewer than 100 employees, annual revenue under a certain threshold (often $5 million or less, though this varies by insurer), a physical location of a certain size, and a business type that the insurer considers low-to-moderate risk. Higher-risk industries — construction, manufacturing, transportation — often do not qualify for a BOP and instead need a Commercial Package Policy (CPP) with individually tailored coverages.

BOP vs. Commercial Package Policy (CPP)

A BOP uses standardized forms and is priced as a package — fast to quote, simple to administer, cost-effective. A Commercial Package Policy (CPP) is customized for businesses that don't fit BOP eligibility — it assembles individual coverage forms into a single policy. The CPP offers more flexibility but requires more underwriting time and typically costs more than a BOP.