Handbook / Business insurance

Business owner's policy (BOP): what it bundles and who it suits

Small business insurance can feel like a menu with too many items. A business owner's policy is the set meal: several common coverages bundled into one policy, priced for small businesses. For many people working for themselves, it is the simplest way to cover their equipment and their liability to others. This guide explains what is typically inside, what is not, and how to decide.

What a BOP is

The SBA describes a business owner's policy as an insurance package that combines typical coverage options into one bundle, and says it simplifies buying and can save money. It lists it as suited to most small business owners, but especially home-based business owners.

The Wisconsin Office of the Commissioner of Insurance describes the BOP as a package designed for small offices, stores and certain small service and processing businesses.

What is usually inside

Contents vary by insurer, but a BOP usually includes three parts.

Property. Cover for business property, such as equipment, furniture and inventory, and for a building if you own one. The Wisconsin guide says a BOP includes property insurance for buildings and contents.

General liability. Cover for bodily injury or property damage you are legally liable for, plus defence costs. The guide on general liability explains this part.

Business income. Also called business interruption. The Texas Department of Insurance explains that it compensates for lost income and certain operating expenses if you must stop operating because of a loss your policy covers. It notes payments typically begin after a waiting period or deductible, and that common exclusions include earthquakes, pandemics, and utility outages not resulting from damage to your property.

What is usually not inside

A BOP rarely covers everything. Commonly separate:

• professional liability for errors and negligence in professional services; see professional liability insurance
• workers' compensation, required in many states once you have employees
• commercial auto for vehicles used in the business
• flood and earthquake, often excluded from property cover
• cyber and data breach cover, sometimes an add-on

Insurers often sell add-ons, called endorsements, for some of these.

Who it suits

A BOP tends to suit businesses that:

• own equipment, tools or inventory worth protecting
• have some exposure to injury or property damage claims, such as client visits or work at client premises
• want income protection if their workspace is damaged
• are small and fit an insurer's eligibility rules

The Wisconsin guide notes eligibility depends on factors such as premises size, liability limits needed, type of operation and off-premises activity. Some higher-risk trades may not qualify and need separate policies.

BOP or home-business rider

If you work from home, start by asking your home insurer what your current policy excludes. Many home policies limit cover for business property and business activities.

The SBA describes a home-based business rider as coverage added to homeowner's insurance that can protect a small amount of business equipment and give liability cover for third-party injuries. For a quiet desk-based business with little equipment and no visitors, a rider might be enough. If you have more equipment, inventory or client visits, a BOP may fit better. Get quotes for both.

Sizing the cover

Property limit. List your business property and what it would cost to replace. Ask whether the policy pays replacement cost or actual cash value.

Liability limit. Consider your exposure and any client contract requirements.

Business income. The Texas guide suggests making sure limits cover more than a short closure, considering rent, utilities, salaries, equipment leases and other operating costs. Estimate your monthly fixed costs and how long recovery might take.

Buying

The SBA's buying steps are to assess your risks, find a reputable licensed agent and shop around, comparing rates, terms and benefits. When comparing BOP quotes, line up:

• property limit and valuation basis
• liability limits
• business income limit and waiting period
• deductibles
• exclusions and available endorsements

Describe your business accurately. If your work changes, tell the insurer.

Review every year

As you buy equipment, add services, hire or move, your cover needs change. Review your BOP at each renewal, and update the property list.

A BOP bundles property, liability and business income cover for small businesses. Check what your home policy excludes, compare a BOP with a rider, and buy the missing pieces separately.