Even before the COVID-19 pandemic, the economy was growing substantially in the sector known as micro-businesses. Post COVID-19, the growth of micro-businesses has skyrocketed. COVID—19 relief funds financed some of this growth and spurred on by platforms like Amazon, Etsy and eBay allowing those micro-businesses access to world markets.  

In 2019, ISO/Verisk introduced the Micro-Businessowners Coverage Form (BP 00 04). Based on their Businessowners Coverage Form (BP 00 03), ISO/Verisk sought to streamline insurance coverages tailoring coverage to meet the needs of the micro-business sector. Micro-businesses come in all shapes and operations, though many start and continue to operate as home-based businesses, some operate at other locations such as the following.  

ISO/Verisk generally defines a micro business as one with up to four employees, including the owner, and sales that do not exceed $500,000.   

Coverage Summary  

Micro-Businessowners Coverage Form BP 00 04 is largely based on ISO's current Businessowners Coverage Form BP 00 03. We describe notable features of BP 00 04 below.  

ISO/Verisk designed eligibility for the Micro-BOP to address various service and retail risks.  

Property Section  

Given the nature of these types of businesses, building coverage is usually not needed and the coverage form does not include physical damage for buildings. Additionally, buildings are explicitly referenced in the description of property not covered. Thus, business owners should insure their real property under other types of coverage forms such as the standard BOP or other commercial property forms.  

Property coverage is limited to business personal property. The form does not tie business personal property coverage to any specific premises. Therefore, off-premises coverage is available at full limits. This can be helpful to entrepreneurs who use co-working spaces or work frequently at public locations.  

Stock is also expressly named as property not covered. Agents can include coverage for stock by using Micro-Businessowners Retail endorsement (BP 20 01) discussed later in this article.  

The Micro-BOP provides a standard property limit of $2,500. This amount is probably adequate for most of the businesses eligible for the Micro-BOP. It is quite possible that the insured could cover some of the personal property for a home-based business under their homeowner’s policy. The insured may request higher limits of up to $25,000 for business personal property.  

Unlike the standard BOP, the Micro-BOP provides coverage on a named perils basis. The covered perils are akin to what ISO has established within their Named Perils endorsement (BP 10 09) under the standard BOP. The insured may consider this as this presents a significant reduction in coverage when compared to the standard BOP.  

The 12 perils covered for property losses include the following.  

The form provides additional coverage for “electronic data” up to a sub-limit of $1,000. The insured can purchase higher limits. Electronic Data additional coverage provides coverage for the following additional causes of loss.  

There is no coverage for loss or damage caused by or resulting from manipulation of by any employee or contractor employed.  

Exclusions  

The Micro-BOP contains exclusions similar to ISO’s Named Perils coverage. Since the policy provides no coverage for buildings, the form does not address ordinance or law. The list of exclusions includes but is not limited to the following.  

The Micro-BOP also will not pay for loss or damage caused by or resulting from any of the following.  

The Micro-BOP adds exclusions for weather conditions (if weather conditions contribute in any way to a cause the loss), acts or decisions and for negligent work.  

Liability Section  

This Insuring Agreement is identical to the standard BOP, except that it does not include an exclusion for professional services. The insured can, however, exclude professional services coverage by endorsement by using the Micro-Businessowners Professional Services Exclusion (BP 21 03) described later in this article.  

Industry Specific Endorsements  

The retail and services endorsements described below addressed additional insureds.  

Micro-Businessowners Retail Endorsement (BP 20 01)  

Agents can use this form to modify the Micro-BOP to address issues related to retail exposures.  

Specifically, it adds “stock” to the list of covered property. It adds the peril of theft for losses with respect to stock. Such coverage is subject to a separate $500 theft deductible. While adding theft as a peril, there are added exclusions that exclude coverage for acts of dishonesty, false pretense and inventory shortages.  

This endorsement amends Section II - liability to include blanket additional insured status for entities when required by written contracts.  

Micro-Businessowners Service Endorsement (BP 20 02)  

This form is used to modify the Micro-BOP to address issues related to service-related exposures. It adds the peril of theft for losses with respect to property of others in the insured’s care, custody or control.  

While adding theft as a peril, there are added exclusions that exclude coverage for acts of dishonesty and false pretense. The endorsement extends some additional coverage to include payment of rewards up to $500 to persons providing information leading to an arrest and for the return of stolen property, and key and lock replacement for $1,000.  

Section II - Liability is amended to include blanket additional insured status for entities required by written contracts.  

Micro-Businessowners Professional Services Exclusion (BP 21 03)    

The form excludes liability arising out of any professional services. The endorsement wording specifically lists the usual professions shown below. It also has wording that states the form does not limit the exclusion to the below-listed activities. Thus, consider the exclusion as excluding all professional liability coverage for any service.  

Those services specifically excluded include the following.  

Micro-Businessowners Professional Liability (BP 22 02)  

This endorsement allows adding professional liability for a specific service by listing the service on the endorsement. The Micro-Businessowners Professional Liability endorsement lists the following exclusions.  

The next two endorsements below are standard on most policies that provide general liability coverage.  

BP 21 01 – Micro-Businessowners Abuse or Molestation Exclusion    

BP 21 02 – Micro-Businessowners Employment-related Practices Exclusion    

Conclusion  

Overall, we characterize the Micro-BOP (BP 00 04) as a commercial general liability policy with some added additional property coverage. In our opinion, the base $2,500 limit is not a lot of coverage for every type of eligible risk. As mentioned, higher limits are available. Moreover, according to an ISO representative, coverage is narrow by only providing coverage for ISO specified perils, but this reduced coverage may come at a significant savings in premium which may be attractive to these risks.  

It may be a good fit for many enterprises that fall into the micro-business sector. That is particularly true for those who operate a home-based business. The Commercial General Liability portion provides coverage for the significant limits that businesses need. That alone would make the Micro-BOP a worthwhile product for micro-businesses. However, if there is anything more than minimal property exposures, the BOP is preferable because it provides open-peril coverage at greater limits.  

The value of a Micro-BOP versus a standard BOP lies in the premium savings between the two. Without a significant premium differential between a Micro-BOP and BOP, agents should encourage their insureds to choose the standard BOP over the Micro-BOP.