Business Owner’s Policy: Your Guide to Small Business Insurance

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Prepackaged first aid kits are popular for a reason. They typically cost less than homemade versions, require no assembly, and eliminate the labor of deciding what to include.

Think of a business owner’s policy as the ready-made first aid kit of the business insurance world. These insurance packages are specifically designed to meet the needs of small and mid-size business owners and are typically offered at a reduced rate.

What is a business owners policy (BOP)?

A business owner’s policy is a type of small business insurance that bundles multiple coverage types into a single insurance package. These packages often offer coverage at a lower rate than the same separately purchased policies. Business owner’s policies are generally only available to small and mid-size businesses in lower-risk industries such as food service, retail, and manufacturing.

What does a business owner’s policy typically cover? 

Think of a business owner’s policy as an all-in-one—or most-in-one—defense against common lawsuits and property damage. Policies differ across providers, with different insurance companies offering different coverage limits, exclusions, and rates. The specifics vary based on your company’s needs and an insurance company’s offerings, but most business owner’s insurance policies include:

  • Property damage. Business owner’s policies frequently include commercial property insurance, which covers damage to commercial properties like offices or storefronts due to fire, accidents, natural disasters, or vandalism. Property coverage can also compensate business owners for damage to business equipment or inventory. 
  • Legal liability. General liability insurance covers damage a business causes to non-employees or non-business property during normal business operations. Liability protection can cover bodily injury, property damage, and personal and advertising injury (like claims of libel or wrongful prosecution). In case of a covered incident, the insurance may pay for the injured party’s medical expenses, compensate business owners for costs related to property damage, and pay legal fees incurred as the result of a liability claim.
  • Business interruption. An incident that causes significant damage to a commercial property can also result in a loss of business income. Business interruption insurance, frequently included in a business owner’s policy, can replace income lost as the result of a covered incident.

Many insurance providers also offer policy add-ons, a common method for customizing a business owner’s policy to meet your business’s specific needs. Here are a few policies you can include in your BOP, or that may already be included in your policy:

  • Employment practices liability insurance. Employment practices liability insurance can compensate employers for costs related to an unlawful termination or discrimination lawsuit.
  • Cyber liability insurance. Cyber liability insurance compensates businesses for expenses related to cyber attacks, including data breaches and ransomware, which are increasingly common. It helps if you have to inform customers about an attack and can compensate them in case of a claim.
  • Flood insurance. Many business owner’s policies exclude property damage resulting from floods from their basic plans. Some insurance companies allow business owners to add flood insurance to a BOP for an additional fee.
  • Workers’ compensation insurance. Many states require businesses to carry workers’ compensation insurance. Although this type of coverage is not included in a standard business owners policy, some providers offer it as a policy add-on.
  • Professional liability insurance. Also known as errors and omissions coverage, professional liability insurance offers financial protection for negligence claims pertaining to professional services. Professional liability insurance is not typically offered as part of a standard business owner’s policy.
  • Commercial auto insurance. Commercial auto insurance provides liability coverage and coverage for damage to business vehicles. It is not typically offered under a business owner’s policy.

Note that different insurance providers set different parameters around policy add-ons. For example, while some small business insurance companies offer workers’ compensation insurance as an add-on to a BOP, many providers require a separate policy for this coverage.

How does a BOP work?

Not all businesses are eligible for BOP insurance. Typically, only small businesses in lower-risk industries (such as food service, retail, and manufacturing) qualify for a business owner’s policy. This usually means businesses that have fewer than 100 employees, operate on-premises, make less than $1 million in annual revenue, and require less than one year of business interruption insurance.

A BOP may be a good fit if you work from an office or sell products from a storefront, but remember that it may not be the only insurance policy you need (see the policy add-ons mentioned above). For example, if you have vehicles, you need to purchase ​​commercial auto insurance separately; if you have employees, you still need workers’ compensation insurance. A BOP isn’t necessarily an automatic one-stop insurance solution.

Which businesses should obtain a BOP?

BOP insurance packages are tailored to the needs of small and mid-size business owners. Many small businesses can benefit from coverage, including:

  • Businesses with vulnerable assets. Businesses that operate on a property or have assets that can be damaged or stolen may benefit from business property insurance under a business owner’s plan.
  • Businesses with legal liabilities. Businesses at risk of a lawsuit related to customer or third-party injury can benefit from a BOP’s general liability coverage provisions.
  • Businesses that cannot sustain themselves through interruptions. Business owners who rely on business income to pay their bills can benefit from business interruption insurance under a BOP.

For businesses that require a smaller scope of coverage—for example, a remote consulting business that operates with few tangible assets—a BOP may or may not offer a better value than separately purchased coverages. Obtaining multiple quote types can help you identify the insurance package that best fits your needs.

How to obtain a BOP

Although BOPs are insurance packages, finding a suitable BOP for your business involves the same steps as purchasing an individual insurance policy. To obtain BOP insurance, assemble basic information about your business (such as your annual revenue and number of employees) and contact an insurance broker, an insurance company, or consult an online insurance marketplace to determine eligibility and assemble a quote.

To identify the best fit package, many business owners solicit quotes from multiple insurance companies and compare coverage types, insurance rates, and policy add-on options.

Business owner’s policy FAQ

What does a business owner’s policy cover?

Although coverage specifics vary by policy, a business owner’s policy typically covers property damage, liability for personal injury, and loss of business income due to an accident or natural disaster.

What is not covered under a business owners policy?

Business owner’s policies do not typically cover commercial auto insurance, health insurance, disability insurance, workers’ compensation insurance, professional services insurance, or professional liability insurance. In most cases, these insurance types must be purchased separately or as policy add-ons.

What are the three major areas that can be covered by business insurance?

A business owner’s policy typically covers general liability claims (e.g., claims related to harm a business does to a non-employee), property damage (including commercial property, equipment, and inventory), and loss of business income due to an accident or natural disaster.