Business Owner’s Policy Requirements: How to Qualify for Comprehensive Business Coverage

A business owner’s policy (BOP) is a great policy for small business owners because it gives them two to three needed policies for one low price. The BOP offers general liability, commercial property, and often business interruption insurance in the policy. However, not every small business is eligible for a BOP. Here’s what you need to know.  

Understanding Business Owner’s Policy (BOP) Coverage

To understand the BOP, let’s review its core components and what businesses need it. 

Core Components of a Business Owner’s Policy

All business owner’s policies contain at least two types of policies: general liability and commercial property. General liability insurance protects the small business against third-party claims such as slip-and-fall accidents. Commercial property insurance replaces lost or damaged goods after a covered claim, such as fire, theft, or vandalism. Some BOPs also have business interruption insurance included, which provides the business with an amount equal to the revenues that it would have generated if the claim didn’t shut the business down for a period of time.  

Who Needs a Business Owner’s Policy?

Just about any small business can benefit from having a BOP. Business owners with a lease may be required to get general liability insurance, which is included in the BOP. And if a business has any property (computers, supplies, furniture) or inventory, it will want the commercial property insurance coverage offered in the BOP. 

Key Requirements for Obtaining a Business Owner’s Policy

Let’s take a look at the key requirements insurance carriers have when issuing BOPs to businesses. These criteria could affect the costs of a BOP. 

Eligibility Criteria and Underwriting Factors

Insurance companies look at certain factors when underwriting a BOP for financial loss. 

Size of Business

BOPs are designed specifically for small businesses. A medium—to large-sized business will have trouble being eligible for one.  

Type of Business

Most insurance companies offer BOPs for a wide range of businesses and industries. However, some companies may have problems covering high-risk industries with a BOP. 

Length of Business Interruption Insurance Usage

A BOP may limit the amount of business interruption coverage you have. It will likely cover the loss for a designated period of time, such as six months to two years. This is designed to give the business ample time to rebuild its primary location and get past the claim. 

Location

Some business locations are more prone to claims and financial losses than others. The insurance company will determine whether it will write a BOP for your area. Note that while it may restrict underwriting to certain locations, some high-risk locations may be underwritten at a higher premium rate. 

Revenue

Revenue is a significant factor for insurance companies. Most insurers will write a BOP for a small business with up to $5 million in revenues. Some companies do write higher revenues, going as high as $30 million.  

Number of Employees

Since a BOP is designed for a small business, an insurance company may restrict coverage if you have more than a certain number of employees. While most insurance companies use revenue to determine size, some may also want to know how many employees you have to establish risk. 

Optional Add-Ons and Customization You May Be Eligible For

Many insurance companies offer endorsements on BOPs to help you customize your coverage. 

Equipment Breakdown Insurance

Equipment breakdown insurance pays to repair or replace key equipment and machines used in the manufacturing or deployment of your products and services. 

Hired and Non-Owned Auto Insurance

A small business owner can get coverage for rented autos or employee vehicles used for business. This prevents the need to purchase a separate commercial auto insurance policy. 

Data Breach Coverage

Data breach and cyber liability coverage are other endorsements you can get. It covers losses resulting from cyber-attacks and losses of data to nefarious individuals. 

How to Select the Right Policy

There are some key components to consider when selecting the right policy. 

Assess Your Business Needs

Take a look at the risks your business faces and what could cause a loss or closure. Get a policy that protects against these risks and provides enough coverage to prevent financial loss.

Compare Different BOP Providers

Once you know what baseline coverage you need, shop the BOP around with various providers. You may find lower rates with certain carriers who eagerly seek to insure the type of risk your company has. Take a look at the best business owner’s policy carriers in our guide.

Customize to Fit Your Business

Add coverage or endorsements to customize the BOP to meet your company’s needs. Remember that double coverage doesn’t mean double price when it comes to liability, and you can often get a better policy for just a little bit more premium. 

Navigating Business Owner’s Policy Requirements

A BOP is a comprehensive solution to the risks a small business faces. Work with a knowledgeable insurance agent to help determine if your business is eligible for a BOP and what customizations you should consider.