What is Business Owner Policy (BOP)
A business owner policy (BOP) combines protection for all major property and liability risks in one package. This type of policy assembles the basic coverages required by a business owner in one bundle. It is usually sold at a premium that is less than the total cost of the individual coverages. BOPs are usually targeted at small and medium-sized businesses. They typically contain business interruption insurance, which provides reimbursement for up to a year of lost revenue resulting from an insured loss.
BREAKING DOWN Business Owner Policy (BOP)
Specific coverages included in a BOP varies among insurance providers, but most policies require businesses to meet certain eligibility criteria to qualify. A typical BOP policy includes...
- Property insurance: The property insurance portion of a BOP is usually available as named-peril coverage, which provides coverage only for damage caused by events specifically listed in the policy (typically fire, explosion, wind damage, vandalism, smoke damage, etc.). Some BOPs offer open-peril or “all-risk” coverage; this option is available from the “special” BOP form rather than the “standard” type of BOP. Properties covered by a BOP usually include buildings (owned or rented, additions or additions in progress and outdoor fixtures). BOP will also cover any business-owned items or items owned by a third party but kept temporarily in the care, custody or control of the business or business owner. Business property must usually be stored or kept in qualifying proximity of business premises (such as within 100 feet of the premises).
- Business interruption insurance: The insurer covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.
- Liability protection: The insurance company covers the insured's legal responsibility for damages it may inflict on others. This damage would have to be a result of things done in the normal course of business operations, which may cause bodily injury or property damage due to defective products, faulty installations and errors in provided services.
Optional Business Owner Policy Coverages
A business owner policy might also include crime insurance, vehicle coverage, and flood insurance. Depending on a business' individual situation, the business owner and the insurance company may make arrangements for additional coverage components. Some of these might include certain crimes, spoilage of merchandise, computer equipment, mechanical breakdown, forgery and fidelity bond, but the coverage limits for these inclusions are typically low.
A BOP typically does not cover professional liability, worker’s compensation, health or disability insurance. These items would require separate policies.