The business owners policy (BOP) is the commercial equivalent of the homeowners policy. It provides property and liability protection for small businesses. The BOP offers business property and liability protection for small and medium sized offices, apartments, manufacturing, service and processing businesses. It provides broad coverage on a simplified basis. The BOP contains its own declarations and common conditions form similar to those found in the commercial package policy for larger businesses.
Whether or not a business is eligible for a BOP depends upon the size of the area of the small business. Office buildings may be no more than 6 stories high and contain no more than 100,000 square feet, and apartments and wholesale services may not exceed 25,000 total square feet with less than $3 million in gross annual sales.
Property coverage is provided under one of two available forms:
These coverage forms include a definitions section, as well as conditions and exclusions. Property coverage is subject to a deductible. The standard form provides coverage against the cause of loss, including:
The Special Form provides open-peril coverage except for those causes of loss that are specifically excluded.
Both forms have available optional coverages for an additional premium. Optional coverages available under the Standard Form include:
The optional coverages available under the Special form include money and securities in addition to the available coverages of the Standard form.
The BOP is comprised of Section I and Section II coverages. Section I covers the insured’s buildings and business personal property. The business personal property is covered in the covered building, on the covered building or anywhere within 100 feet of the insured premises.
Section II of the BOP provides coverage for commercial liability similar in scope to that provided by the CGL. Coverage is provided for the legal liability of the insured arising out of the ownership of the business premises and the business activities. Products liability, fire legal liability, medical payments and supplementary payments are also provided by the liability section in the same fashion they are provided by CGL coverage. The basic liability limit is $300,000 and can be increased to $500,000 or $1,000,000.
There are several classes of risks that are not eligible for BOP coverage including but not limited to:
As mentioned previously, only certain types of small businesses are eligible for BOP coverage. The following are examples of eligible risks for BOP coverage:
Under both policy forms, losses, except money and securities, are settled on a replacement cost basis. This includes coverage for the buildings and the business personal property. Deductibles are available starting at $500 (standard and may be increased to reduce the premium (maximum of $2,500).
The property not covered by the BOP is very similar to the excluded property listed in a CGL.
Several endorsements may be attached to a BOP, including:
This endorsement extends to cover damage to perishable stock owned by or in the insured’s care, custody, or control at the insured premises. It includes 3 covered causes of loss including:
This endorsement extends liability protection for hired autos and non-owned autos. Hired auto liability covers bodily injury and property damage to others as a result of operating autos that it leases. Non-owned auto coverage protects the small business insured who operates a vehicle owned by another.
This endorsement covers loss to valuable papers and records that the insured possesses (except money and securities).
This endorsement will provide liquor liability coverage in limited instances. The insured must list the specific functions at which liquor will be sold. An insured who is engaged in fundraising or social activities may add this endorsement to extend liability coverage.
Provides up to $10,000 coverage for the costs of extracting pollutants from land or water at the insured’s premises as a result of a covered loss.
Pays loss of income that the insured sustains due to actions of civil authorities that prohibit access to the insured premises because property other than at the insured premises was damaged by an insured peril. Coverage begins 72 hours after the action by the civil authority and is available for up to three consecutive weeks.
Business Owners Policy (BOP) provides property and liability protection for small businesses. Key points about BOP include:
Endorsements that can be added to a BOP include Spoilage, Hired and non-owned auto, and more.
Sign up for free to take 5 quiz questions on this topic