A business owners policy (BOP) is a business insurance package geared toward small businesses. It combines important coverages into one policy, usually at a cheaper rate than buying them individually. A BOP covers two main areas: property and liability.
- Property Insurance: Property insurance in a BOP works to protect the physical structure of the business building and some items and equipment inside. It offers compensation if the structure is damaged or loss due to fire, lightning, smoke, wind, hail, theft, vandalism and more.
- General Liability: General liability references accidents that occur on the business property. If a third party suffers bodily injury or property damage as a result of everyday operations for the business, general liability can help pay medical expenses as well as legal fees should the victim decide to sue.
A BOP also usually comes with business interruption insurance, which provides compensation for income lost due to the business being unable to operate after a fire or other disaster. BOPs are generally limited on what you can add to your policy. You can add certain specialized coverages, however, such as data breach insurance.
What Does a Business Owners Policy Not Cover?
There are some coverages that you must buy individually or bundle outside of a BOP. A typical business owners policy does not cover:
- Professional Liability: Professional liability insurance is also known as errors and omissions insurance and covers claims of negligence filed against the company. In particular, it covers liability as it relates to advice from the business causing a client to lose money.
- Commercial Auto Insurance: Businesses that frequently use vehicles for work purposes need commercial auto insurance. Most states require a certain amount of auto liability, but businesses can also purchase comprehensive, collision and uninsured motorist coverage for their work vehicles.
- Workers Compensation: Workers compensation helps with medical expenses and other benefits if an employee is injured on the job.
- Crime Insurance: This coverage provides compensation in the unfortunate circumstance that an employee commits crimes against the company, such as stealing funds or committing fraud.
A commercial package policy (CPP) is like a BOP because it’s a similar package that also covers general liability and property damage. This package is more flexible but is usually more expensive, and thus often used by large businesses. BOPs are great for small or start-up businesses looking for affordable insurance.