What Is a Business Owner’s Policy and What Does It Cover?
A Business Owner’s Policy, commonly known as a BOP, combines several important types of insurance coverage into a single policy.
Shanti
8/24/20262 min read
What Is a Business Owner’s Policy and What Does It Cover?
Starting a small business requires a significant amount of time, money, and effort. However, a fire, theft, customer injury, or temporary business closure can result in substantial expenses. A Business Owner’s Policy, commonly known as a BOP, combines several important types of insurance coverage into a single policy.
A BOP typically provides two main types of coverage in one package:
• Commercial property insurance
• General liability insurance
Many BOP policies also include business interruption coverage. Purchasing these coverages as a package may be simpler and more affordable than purchasing them separately. According to guidance from the Texas Department of Insurance, many insurance companies offer these coverages as part of a BOP, and this combination generally costs less than purchasing each coverage separately.
What Does BOP Insurance Typically Cover?
Commercial Property
This coverage can protect the building, equipment, furniture, inventory, and other property owned by the business against covered losses.
For example, depending on the terms of the policy, damage caused by the following events may be covered:
• Fire and smoke
• Explosion
• Theft or vandalism
• Wind and certain weather related events
• Damage to equipment or inventory
If you rent your business location, the building owner’s insurance does not necessarily cover your furniture, equipment, or inventory. A commercial tenant generally needs separate coverage to protect business property.
General Liability
If a customer or another person is injured at your business location, or if your business activities cause damage to someone else’s property, you may face a claim or lawsuit.
If the incident is covered, the general liability portion of a BOP may help pay for expenses such as:
• Medical expenses for the injured person
• Damage to another person’s property
• Legal defense costs
• Compensation arising from certain advertising related claims
For example, if a customer slips and is injured inside your store, general liability coverage may help pay expenses related to the incident.
Business Interruption
If a covered event, such as a fire, forces your business to close temporarily, repair costs may not be your only concern. You may also lose income while your business is unable to operate.
Subject to the terms of the policy, business interruption coverage may help compensate for expenses and losses such as:
• Lost income
• Employee wages
• Rent
• Certain fixed expenses
• The cost of temporarily relocating the business
The waiting period, coverage period, and method used to calculate lost income vary by policy and should be reviewed before purchasing coverage.
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