Business owner's policy
A business owner's policy, or BOP, is a package policy that bundles business property, liability, and business income or interruption coverage for eligible small businesses under one premium. The declarations, deductibles, exclusions, limits, endorsements and state rules decide what it pays and what the business pays itself.
Also called: bop, business owners policy, business owner's policy (bop)
A BOP puts the coverages a small business most often asks about into one policy with one premium: damage to the building and contents, claims that the business hurt someone or damaged their property, and lost income while a covered loss shuts the business down. "Package" does not mean unlimited. Each part has its own limit, deductible and conditions, and the declarations page and endorsements control what a claim pays. For a wider view of what a small business might carry, see what insurance a small business needs.
How a BOP property claim is worked out
For a covered property loss, the payment starts with the loss minus the deductible, then is limited by the coverage limit, sublimits, valuation method, exclusions and conditions, according to the California Department of Insurance (opens in a new tab). The figures below are an example, not typical amounts.
Hover or tap a row to highlight it.
| Step | Amount |
|---|---|
| Covered loss | $20,000 |
| Minus deductible | $2,500 |
| Starting amount | $17,500 |
The $17,500 is still subject to the policy's other terms. A higher deductible generally lowers the premium and raises the business's share of a covered loss, according to the California Department of Insurance (opens in a new tab).
What a BOP can include and what changes it
A BOP has no national schedule of typical limits or deductibles. The insurer, business class, location, form and endorsements set the price and the payout. The main moving parts, according to the NAIC (opens in a new tab) and the California Department of Insurance (opens in a new tab):
- Eligibility: BOP eligibility generally covers companies with 100 or fewer employees and revenue up to $5 million. That is an underwriting rule, not a legal definition.
- Property limits: the declarations can show separate limits for buildings and business personal property, and valuation, coinsurance, replacement-cost provisions and sublimits can reduce what is paid.
- Liability limits: the declarations list per-occurrence and aggregate limits, which set the most the policy pays.
- Business income and extra expense: in the base policy or added by endorsement. Payment depends on covered physical damage, the period of restoration, limits and waiting periods.
- Causes of loss: basic, broad or special wording. A special form generally covers direct physical loss unless excluded, while named-peril wording responds only to listed causes.
- Optional coverages and sublimits: crime, employee dishonesty, equipment breakdown, hired and non-owned auto liability and similar additions, which Florida's Department of Financial Services (opens in a new tab) says often carry sublimits.
- Separate lines: commercial auto and workers' compensation are generally excluded and need their own policies.
Where you will see a BOP
The term appears in a quote or proposal near the coverage summary and premium, a binder that shows temporary evidence of coverage, the declarations page, the coverage forms, exclusions and endorsements, a renewal notice and a claim letter. A lender or landlord may ask for one by name even when the final policy uses a different product name. A BOP is a business product, not an auto, homeowners, renters, life, health or pet policy.
A home-based business is a common place to check. Homeowners and renters policies may limit business property to $2,500 in the home and $250 away from home, may exclude business liability and do not pay for downtime, according to the NAIC (opens in a new tab). For Connecticut specifics, see our Connecticut small business insurance guide.
Connecticut and New York rules
Neither state requires a business to buy a BOP, but both regulate cancellation and renewal.
In Connecticut, Conn. Gen. Stat. § 38a-324 (opens in a new tab) applies to commercial risk insurance other than workers' compensation and residual-market auto. After a policy has been in effect more than 60 days, or after a renewal takes effect, the insurer can cancel only for listed reasons such as nonpayment, fraud or material misrepresentation, or a material increase in the hazard. Conn. Gen. Stat. § 38a-323 (opens in a new tab) sets notice rules for nonrenewal, conditional renewal and premium billing.
In New York, Insurance Law § 3426 (opens in a new tab) governs cancellation, conditional renewal and nonrenewal of most commercial lines policies, including BOPs. During the first 60 days of a new policy the insurer can cancel for a reason the law does not prohibit; after that, cancellation is limited to the statutory grounds, as DFS Opinion No. 11-02-02 (opens in a new tab) explains.
New York also charges a fire insurance fee of 1.25% of the applicable property premium under Insurance Law § 9108 (opens in a new tab). In the DFS example (opens in a new tab), a $2,418 BOP premium with a 50% property portion ($1,209) carries a $15.12 fee, for a total of $2,433.12 before other taxes, fees or endorsements.
Questions to ask an agent or insurer
- Which property, liability, business income and other coverages are included, and which are excluded or sublimited? A package does not mean unlimited coverage, and the forms and endorsements control the claim.
- What are the limits, deductibles, valuation methods and coinsurance requirements for the building, business personal property, liability and business income? The amount paid after a covered loss depends on them.
- Does the BOP cover my actual locations, employees, products, services, contractors, online activity and home-based or off-premises work? Eligibility and coverage depend on the described operations and premises.
- Do I need separate commercial auto, workers' compensation, professional liability, cyber, flood, earthquake, crime or employment practices coverage? Several of these risks are generally outside a BOP.
- What changes must I report before renewal or before starting a new operation? Changes in occupancy, operations, sales, payroll or hazard can affect premium, eligibility, cancellation and claims.
Frequently asked questions
These come up when a business owner compares a BOP with other commercial policies.
Does a BOP include workers' compensation or commercial auto?
Generally, no. The California Department of Insurance (opens in a new tab) lists both as generally excluded from BOPs, and separate policies are commonly used for those risks.
Is a BOP the same as a commercial package policy?
Both are commercial package products. A BOP is a more standardized package for eligible small-business classes, while a commercial package policy is generally more modular and covers ventures outside the BOP program, according to the NAIC (opens in a new tab).
Is a BOP the same as general liability insurance?
No. General liability is one component. A BOP can also include property and business income coverage, and the general liability vs professional liability guide shows how those liability lines differ.
Does business interruption coverage pay for any shutdown?
No. It generally responds to lost income tied to covered physical damage and the waiting period and conditions in the policy. Flood, earthquake, mudslide, viral outbreaks and other causes may be excluded or separately insured, according to the NAIC (opens in a new tab).