A business owners policy (BOP) is a type of business insurance policy geared to cover certain businesses. It generally combines coverage for a cheaper price than paying for the coverages individually, but not all business owners may be eligible for this coverage.

As a rule, BOPs are available only to small businesses in low risk industries.

How Small is a Small Business?

The category of “small business” varies depending on your industry. The size of a business is generally categorized by its annual income and its number of employees. In some industries, 100 employees may be a small industry while in others, 1,000 employees can still be considered a small business. For insurance purposes, many small businesses are those with less than 100 employees.

It is important to understand what category your business falls into, as it will affect the type of insurance available to you. Your insurance needs may also change as your company grows and develops, so be sure to remain in contact with your insurance agent.

What is a Low Risk Industry?

A large aspect of business insurance is calculated based on the risk it presents. The more at risk your business is for suffering a lawsuit or accident, the more insurance you may need. Low risk industries are those that are not considered to have a high risk of accidents or claims. Such industries may include:

• Retail
• Food and beverage
• Insurance professionals
• Nonprofits
• Photographers
• Video professionals
• Consultants
• Real estate
• Business design

This is not a comprehensive list, of course. If you have any questions about whether your business is high risk or low risk, speak with an insurance agent. In general, businesses that offer heavy risk of loss to third parties such as buyers and financial institutions are considered high risk. This includes businesses that offer services to government institutions.

What Does a Business Owners Policy Cover for Small Businesses?

A basic business owners policy combines two main coverages:

• General Liability: General liability insurance covers basic claims against the business concerning bodily injury, property damage and personal and advertising injury. This insurance can pay for damages as well as expenses related to a lawsuit such as defense fees and settlement costs.
• Commercial Property Insurance: Commercial property insurance covers the physical property of the business and its contents, such as an office or restaurant. It covers damages caused by fire, wind, hail, lightning, smoke, theft, vandalism and more.

However, BOPs are flexible policies that will allow you to add different coverages as needed by your business. Common coverages that business owners may add include:

• Professional Liability: Professional liability insurance covers claims of professional negligence that may cause a client to lose money. This insurance is also known as Errors and Omissions insurance or medical malpractice insurance, depending on your industry.
• Umbrella Liability: Umbrella liability insurance fills in the gaps left by your other liability insurance policies. If your general liability insurance policy reaches its limit for a single claim, for example, this insurance can step in to cover the remaining expenses.
• Directors and Officers Liability: Directors and officers insurance covers claims against a business’ key employees, such as directors and officers. It can cover claims concerning misrepresentation, fraud, lack of corporate governance and more. These policies also often come with Employment Practices Liability (EPLI), which covers claims concerning discrimination, sexual harassment, wrongful firing or hiring, mismanagement of employee benefits, etc.
• Commercial Auto Insurance: Commercial auto insurance provides liability, property and medical bills coverage for vehicles owned or used by a business for work purposes. This may include comprehensive coverage, collision coverage, liability, medical payments coverage, uninsured/underinsured motorist and more. You can also purchase Hired and Non-Owned Auto to cover vehicles borrowed or rented by the business.
• Equipment Breakdown Coverage: Equipment breakdown coverage provides compensation for equipment owned by the business that suddenly breaks down due to an incident. This insurance allows you to repair or replace your business’ valuable equipment quickly.

What is the Difference Between a BOP and a Commercial Package Policy?

Where a BOP is geared for small businesses in low risk industries, commercial package policies (CPP) are policies specifically created for large businesses in high risk industries. Since the insurance needs between these two types of businesses are different, these policies are built to reflect that. This means that most CPPs offer higher coverage limits on certain insurance coverages than a BOP. It also means CPPs generally cost more than BOPs due to the higher limits and nature of the insured business.

When in double, ask an insurance agent about protecting your business with the right insurance policy.

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