Business owners policy insurance: what to know
A business owner policy (BOP) is a popular insurance package for a number of home-based, small and mid-sized businesses. It often is a combination of business property and general liability coverages and typically runs cheaper than when each policy type is purchased separately.
While it may not contain all of the insurance coverage types necessary to operate your business, most small businesses that own or rent business space or equipment could benefit from a BOP.
Read on to learn more about this versatile and convenient form of business insurance, including what it covers, who is eligible and where to find it.
What does a business owners policy cover?
The primary benefit of a business owners policy is the convenience of combining multiple insurance types into one policy. This typically includes general liability and business property coverages which, when purchased together, are often cheaper than when purchased separately.
Coverages falling outside this policy type can typically be added à la carte through endorsements depending on your specific business needs.
See below two primary components of a business owners policy.
Commercial general liability
Liability insurance is crucial for any business. Liability protection covers things like customer bodily injury and property damage, as well as advertising injury. Such coverage can protect you and your business in the event you are sued by someone outside of your company for damage sustained by your business or services.
Damages covered by commercial general liability coverage:
- Bodily injury liability
- Property damage liability
- Personal injury
- Advertising injury
- Medical payments
- Damage to premises rented by your business
- Products — completed operation (goods you produce or sell)
For some business insurers, the main difference between business owners policy general liability coverage and that of a standard business policy is that the business owner plan typically has a combined liability limit for personal and advertising injury, while a standard plan will usually split these out into separate coverages.
Business property insurance
This portion of the policy covers property damage to any of the physical property related to your business, including product inventory, business equipment and the physical space itself. Basically, any property used by your business is likely to fall under this category, aside from vehicles. As with a homeowners policy, however, be aware your business property coverage has some exclusions, including earthquakes. Confirm any such exclusions ahead of time so you can add necessary endorsements, if available.
Getting commercial property insurance through a business owners policy comes with certain advantages. For example, most BOP policies include extra expenses and business income coverages. Also referred to as business interruption insurance, this can be crucial to staying afloat after suffering a covered loss as it can help prevent a loss of income. In some cases, limits for certain coverages can also be higher than standard coverage forms, including for circumstances such as loss of electronic data.
What isn’t covered by a business owners policy?
While a business owners policy covers many basic business insurance needs, it won’t cover everything. For instance, businesses with employees must still carry workers compensation, which isn’t included in a BOP. Establishments that serve alcoholic beverages will likewise need to look into liquor liability to ensure proper coverage. Some of these coverages may be added to your business owners policy as an endorsement, while others may require the purchase of a separate policy.
Your business owners policy may also exclude certain perils, including earthquakes and floods. Earthquake coverage may vary depending on which state you live in. For flood insurance, The Zebra partners with Neptune Insurance to provide coverage options specifically designed for those with commercial needs. Neptune flood insurance allows for larger coverage limits than a National Flood Insurance Program (NFIP) plan and also offers up to $25,000 in business interruption coverage ($500 per day for up to 50 days).
Other types of coverage needed
Do you need a business owners policy?
Business owners policy insurance is a great option for many small businesses. These include home-based businesses and freelancers, especially those who have valuable business equipment.
In general, combining both general liability and property coverage under the plan is a great way for many businesses to save money and cover many of their insurance bases with one simple policy.
What types of businesses are eligible for a business owners policy?
To be eligible for a BOP, businesses must usually meet requirements for both annual income and the total number of employees. Below are some examples of businesses that most commonly benefit from a business owners policy:
- Self-storage facilities*
- Retail stores
- Apartment buildings
- Convenience stores/gas stations
- Grocery stores
- Smaller office buildings (usually no taller than six stories)
- Small motels (usually no taller than three stories)
*Self-storage businesses with outdoor vehicle storage are ineligible for this coverage.
**A number of restrictions apply, including caps on annual payroll and building size.
Other variations of business owners insurance
Very small businesses — those with fewer than four employees — could even be eligible for what’s called a micro-business owners policy (micro-BOP). This policy type is more stripped-down, typically only covering property loss. These policies may not be available from every insurer.
Business owners policy insurance eligibility
A business owners policy isn't right for everyone. Because most larger businesses are likely to find more comprehensive coverage for their needs through other policy types, many insurers exclude them from eligibility for a BOP plan. Furthermore, eligibility for BOPs may vary between insurance companies. In general, most eligible businesses adhere to these requirements:
- Less than $1 million in annual revenue
- Locations of no more than 35,000 sq ft
- Low-risk industry
- Fewer than 100 employees
Businesses ineligible for a BOP
Along with the eligibility requirements listed, you are ineligible for a business owners policy if you operate one of the following business types:
- A bar or pub
- Amusement parks
- Banks or financial institutions
- A manufacturing facility
- Auto repair shops
Business owners policy insurance cost
What you pay for your business insurance policy will be largely based on the type of business you operate. Some business types are inherently more prone to risk than others. However, Progressive reports the average cost of businesses purchasing business owner policies through its business program was around $84 in 2020.
Businesses with a high number of employees or added risks are likely to face higher costs, as are business owners with a history of making claims. The best way to see how much a BOP would cost for your business is to reach out for a quote. Get a quote from our partners at Progressive to find out more.
Below you'll find answers to some of the most common questions regarding business owners policies.
What does a business owners policy cover?
A business owners policy (BOP) includes basic liability and property coverage combined into a single policy. Instead of having to buy a separate property damage and general liability policy, these coverages are conveniently combined and cover damage to your property or business, customer medical expenses and defense costs should you be sued by a customer. While this is a great coverage solution for many small businesses, you may still need to seek out other insurance options to make sure you’re fully covered.
How much does a BOP cost?
Prices vary depending on the type and size of business you own, but Progressive quotes the average business owners policy at around $84 per month.
What coverage is not included in a standard business owners policy?
Small business owners with employees will still be required to purchase worker’s compensation insurance. Further coverages depend on your business’s specific needs but may include personal liability, liquor liability, flood coverage, earthquake insurance and health and disability coverage for yourself and employees.
Is business owners policy insurance right for my business?
If you have a small to mid-sized business that generates less than $1 million per year, you would likely be eligible for — and benefit from — a business owners policy. Designed to keep your business operations going and avoid financial loss, the BOP is a great way to get some basic insurance coverage in place to protect your business. However, be aware: a number of other coverage options are available to businesses requiring more coverage, some of which may be added via endorsement.
Business owners policies: considerations
BOP insurance can be a great way to find savings and cover many of your insurance needs in a single policy form. While other coverages may be required, make sure to ask your insurance agent about endorsements to help you customize coverage to better fit your specific needs.
Getting insurance coverage for your business doesn’t have to be difficult. Get a quote from Progressive today.