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What is the Business Owners Policy?

The businessowners policy (BOP) is one of the most widely used commercial insurance policies on the market today. Its versatility and its broad coverage offerings can make it a great solution for many small-to-midsize business owners. The BOP combines a variety of needed coverages in one policy, making risk management and managing renewals much easier for small business owners.

What Coverage Does the Typical BOP Policy Provide?

While the Insurance Services Office (ISO) BOP form is one commonly used form providing coverage for businesses, many commercial insurers develop their own BOP forms to dovetail coverage to many different industries. Typically, these are the coverages the BOP provides.

Commercial property insurance covering buildings. The BOP does not cover flood and earthquake exposures.
Business personal property, such as computers and other business equipment
Personal property of others, for example, a computer repair person who takes in computers for repair (bailment)
Business income and extra expense surrounding business income losses arising from a covered loss under the policy
Premises operations and liability, for example if a business customer trips and falls at your insured's location
Contractual liability such as coverage for the usual contracts used in small business, such as lease agreements
Personal and advertising injury, which can cover allegations of libel, slander and trademark or copyright infringement
Be aware that not all BOPs automatically cover personal and advertising injury, so be sure to evaluate each carrier's form to determine coverage
Employee dishonesty, for example if an employee steals money from his or her employer
Theft of money and securities, which can arise when an employee makes a bank deposit or other theft risks such as burglary or robbery
Forgery and alteration can cover incidents where the insured accepts an altered money order, for example
Equipment breakdown, which can cover electrical, mechanical and computer equipment against malfunctions

What Coverages Should I Include on the BOP?

There is no business auto coverage under the BOP. Many regional carriers use their own or the ISO business auto coverage form and include coverage for autos separately but alongside the BOP policy.

Hired and non-owned auto coverage is a critical protection for most businesses. This coverage can provide liability coverage for your insureds when they rent a vehicle, or their employees drive their own vehicles on their employers' errands. This is a liability-only coverage and does not cover the cost of the employee's vehicle or a leased vehicle. Many agents will only write a BOP with this important added coverage.

Remember, though, the BOP may require an endorsement to add this coverage, while some carriers include it automatically.

Additionally, even though the BOP covers premises liability, you should always offer an umbrella policy to provide an additional layer of liability coverage. With verdicts going higher each year, almost any small business should understand the importance of an umbrella policy. Document a declination with a properly signed declaration form or in your agency management system through email when your insured rejects umbrella coverage.

The BOP will not protect your insured against allegations of professional negligence. For example, if your insured provides accounting advice, the BOP may be perfect to protect your insured against general liability negligence allegations such as a slip in fall in the accountant's office. However, it will not provide coverage for your accountant who provides professional advice. The same holds true for contractors and others who offer professional opinions and guidance. Your insured will need professional liability coverage under a separate policy.

Finally, the BOP may not offer liquor liability for restaurants. Even food trucks that serve alcohol may face liquor liability, and the added risk of an assault occurring as a result of overindulgence. These are two important exposures to consider. Many business owners think if they have liquor liability coverage, they also have coverage for assaults that may occur. This may not be the case, so be sure to evaluate coverage forms if your restaurants serve liquor or offer bring-your-own bottle availability.

How Do Insurers Rate and Underwrite BOPs?

Traditionally, insurers developed the BOP for typical small businesses like florists, small retail stores and other “main-street" insureds. Over the years, however, many carriers have grown their appetite, and included formerly nonstarter businesses such as contractors and restaurants.

Typical rating appetites are below.

Under 35,000 square feet in total floor area
Under $6 million in annual gross sales per location
Building height usually under four stories

Typical rating criteria are below.

Territory (crime and weather are important variables in eligibility)
Building construction
Access to public fire protection
Building occupancy, usually not writing manufacturing exposures
Fire protection including sprinklers and Ansul systems to protect cooking areas
Deductible

Each insurer has its own criteria for rating BOPs, so it may be a great idea to ask a few of your carriers to present a brief seminar on their BOP features versus their competitors.

The great thing about insurance is that as societal needs change, insurance changes to meet those changes. Enter the “Micro-BOP."

What is the Micro-BOP?

Designed by Insurance Services Office (ISO) and available in most states in 2020, the micro-BOP can meet the needs of the small business enterprise. For those professionals working from home or in shared spaces such as a kiosk in a mall, this trimmer version of ISO's BOP can meet the needs of that market segment.

Here are the key underwriting limitations for the micro-BOP.

Less than $500,000 in gross annual sales or revenue
Fewer than five employees, including the owner

These businesses are ineligible for the micro-BOP but will be better served by a traditional BOP or a commercial general liability and commercial property policy.

Businesses operating from a commercial building for more than 90 days (unless a shared space)
Businesses specializing in furnishing rented or leased equipment
Businesses with any sales of alcohol
Manufacturers of personal care or consumed products
Business operating as licensed construction contractors
Wholesale distributors
Auto repair
Businesses that subcontract work

The form offers limited property coverage, but the liability coverage is similar to that of the regular BOP. Additionally, the micro BOP in contrast to the full BOP offers named-perils property coverage as opposed to all-risk coverage. Named-perils coverage provides coverage only for the perils listed in the policy form. In contrast, all-risk coverage provides comprehensive coverage from all loss causes not specifically excluded.

Another important feature of many micro-BOPs is they do not exclude professional services, so your clients who engage in consulting, writing, graphic design, or other professions may find the micro-BOP a perfect fit.

The micro-BOP may be the answer for your insureds who are gig workers or who work from shared spaces. This linked article provides more information on the micro-BOP. The micro-BOP is a great marketing tool for those gig workers who currently shop coverage online or go uninsured.

Gear social media posts to the many advantages, the easy underwriting requirements and the benefits of coverage, and you can build your commercial business with the micro-BOP.

Conclusion

The BOP is a convenient and affordable insurance coverage package designed for a variety of small businesses. It's a great way to get your start in commercial lines before tackling more complex coverages like the commercial property policy or the comprehensive general liability insurance form.

Once you've written the business's BOP, be sure to ask if you can quote their personal business, as well. Then, it's only one step away from offering your BOP clients other life-related products such as critical illness coverage or disability coverage.

The BOP is a solid gateway into your building your commercial lines career. While the BOP is not the answer for more complex business enterprises, it is solid protection for many of your smaller commercial clients without professional liability exposures.

Last Updated: May 12, 2023

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