A business owner's policy (also businessowner's policy, business owner's policy or BOP) is an exclusive type of commercial insurance designed for small and medium-sized companies. By bundling general liability insurance and property insurance into a single policy, BOPs usually offer a reduced premium, frequently making them a more cost-effective choice than separately purchased policies.
Specific coverage included in a business owner's policy varies amongst insurance companies, but most policies require that businesses meet eligibility criteria to qualify.
A typical business owner's policy includes property and liability insurance.
The property insurance part of a BOP is available most often as named-peril coverage, which offers compensation only for damage brought on by events specifically listed in the policy (typically fire, explosion, wind damage, vandalism, smoke damage, etc.) Certain BOPs offer open-peril or "all-risk" coverage; this option is obtainable from the "special" BOP form rather than the "standard."
Forms of property covered by a BOP typically include:
- Buildings: Owned or rented company premises, additions and additions in progress, outdoor fixtures.
- Personal company property: Any items owned by the company or business proprietor or owned by a 3rd party but kept temporarily in the care, custody or control of the company or company owner. To be covered by a BOP, business property must be stored or reserved in a specific proximity of business premises (e.g., within 200 ft. of the premises).
- In addition, many business owner's policies contain business interruption insurance as part of their property coverage. Business interruption insurance provides up to 12 months' income for covered businesses when they are forced to shut down operations because of a covered property event.
The liability part of a business owner's policy provides coverage for third parties who suffer bodily injury, property damage, advertising injury or personal injury on a covered business's premises or caused by the business's owner or employees. This coverage generally takes the form of compensation for legal fees related to third-party lawsuits over such incidents (including lawyers' fees, settlements and court costs). In addition, BOP liability coverage may involve compensation for medical bills that result from an injury to a third party on a covered business's premises for up to one year after the event takes place. In addition to normal coverages, most insurance providers offer optional additions or endorsements on business owner's policies that company owners can utilize to tailor a policy to their precise needs.