Back to Basics – What is the Business Owners Policy?

The business owners policy (BOP) is one of the most widely used commercial insurance policies on the market today. Its versatility and its broad coverage offerings can make it a great solution for many small-to-midsize business owners. The BOP combines a variety of needed coverages in one policy, making risk management and managing renewals much easier for small business owners.

What Coverage Does the Typical BOP Policy Provide?

While the Insurance Services Office (ISO) BOP form is one commonly used form providing coverage for businesses, many commercial insurers develop their own BOP forms to dovetail coverage to many different industries. Typically, these are the coverages the BOP provides.

• Commercial property insurance covering buildings. The BOP does not cover flood and earthquake exposures.
• Business personal property, such as computers and other business equipment
• Personal property of others, for example, a computer repair person who takes in computers for repair (bailment)
• Business income and extra expense surrounding business income losses arising from a covered loss under the policy
• Premises operations and liability, for example if a business customer trips and falls at your insured’s location
• Contractual liability such as coverage for the usual contracts used in small business, such as lease agreements
• Personal and advertising injury, which can cover allegations of libel, slander and trademark or copyright infringement
  • Be aware that not all BOPs automatically cover personal and advertising injury, so be sure to evaluate each carrier’s form to determine coverage
• Employee dishonesty, for example if an employee steals money from his or her employer
• Theft of money and securities, which can arise when an employee makes a bank deposit or other theft risks such as burglary or robbery
• Forgery and alteration can cover incidents where the insured accepts an altered money order, for example
• Equipment breakdown, which can cover electrical, mechanical and computer equipment against malfunctions

What Coverages Should I Include on the BOP?

There is no business auto coverage under the BOP. Many regional carriers use their own or the ISO business auto coverage form and include coverage for autos separately but alongside the BOP policy.

Hired and non-owned auto coverage is a critical protection for most businesses. This coverage can provide liability coverage for your insureds when they rent a vehicle, or their employees drive their own vehicles on their employers’ errands. This is a liability-only coverage and does not cover the cost of the employee’s vehicle or a leased vehicle. Many agents will only write a BOP with this important added coverage.

Remember, though, the BOP may require an endorsement to add this coverage, while some carriers include it automatically.

Additionally, even though the BOP covers premises liability, you should always offer an umbrella policy to provide an additional layer of liability coverage. With verdicts going higher each year, almost any small business should understand the importance of an umbrella policy. Document a declination with a properly signed declaration form or in your agency management system through email when your insured rejects umbrella coverage.

The BOP will not protect your insured against allegations of professional negligence. For example, if your insured provides accounting advice, the BOP may be perfect to protect your insured against general liability negligence allegations such as a slip in fall in the accountant’s office. However, it will not provide coverage for your accountant who provides professional advice. The same holds true for contractors and others who offer professional opinions and guidance. Your insured will need professional liability coverage under a separate policy.

Finally, the BOP may not offer liquor liability for restaurants. Even food trucks that serve alcohol may face liquor liability, and the added risk of an assault occurring as a result of overindulgence. These are two important exposures to consider. Many business owners think if they have liquor liability coverage, they also have coverage for assaults that may occur. This may not be the case, so be sure to evaluate coverage forms if your restaurants serve liquor or offer bring-your-own bottle availability.

How Do Insurers Rate and Underwrite BOPs?

Traditionally, insurers developed the BOP for typical small businesses like florists, small retail stores and other “main-street” insureds. Over the years, however, many carriers have grown their appetite, and included formerly nonstarter businesses such as contractors and restaurants.

Typical rating appetites are below.