Key Takeaways
- The BOP is a SIMPLIFIED package policy designed for small to medium businesses—combining property and liability coverage with AUTOMATIC features not found in CPP.
- BOPs have ELIGIBILITY REQUIREMENTS: typically for businesses with revenue under $10-15 million, fewer than 100 employees, and building size under 35,000 square feet.
- Property coverage under a BOP is written on a SPECIAL CAUSES OF LOSS basis (all-risk) for buildings and BROAD form for personal property—automatically!
- Business Income coverage is AUTOMATICALLY included in BOPs without a separate coverage form or coinsurance requirement.
- INELIGIBLE businesses include auto dealers, bars/taverns, manufacturers (generally), contractors, and buildings over size limits.
Businessowners Policy (BOP)
What is a BOP?
The Businessowners Policy (BOP) is a package policy designed specifically for small to medium-sized businesses. It combines property and liability coverage into a single, simplified policy with automatic features.
Think of BOP as: The commercial equivalent of a homeowners policy—comprehensive, simplified, and cost-effective.
BOP Eligibility Requirements
Not all businesses qualify for a BOP. Eligibility depends on:
| Factor | Typical Requirement |
|---|---|
| Building Size | Under 35,000 square feet |
| Annual Revenue | Under $10-15 million |
| Number of Employees | Fewer than 100 |
| Business Type | Must be on eligible class list |
| Building Stories | Usually 6 stories or fewer |
Eligible Business Classes
| Category | Examples |
|---|---|
| Retail | Clothing stores, bookstores, gift shops |
| Office | Accountants, attorneys, consultants |
| Service | Dry cleaners, beauty salons, repair shops |
| Restaurants | With liquor sales under 25-40% |
| Apartments | Under 6 stories, specific unit limits |
| Contractors | Some artisan contractors |
| Wholesale | Non-manufacturing distributors |
Ineligible Business Classes
| Category | Reason |
|---|---|
| Auto dealers/repair | Requires garage coverage form |
| Bars/taverns | High liquor liability exposure |
| Manufacturers | Complex exposures |
| Banks/financial institutions | Specialized coverage needs |
| Contractors | Most general contractors |
| Large buildings | Over size/revenue limits |
| Condominium associations | Specialized forms required |
BOP Property Coverage
Section I: Property
| Coverage | BOP Automatic Feature |
|---|---|
| Building | Special form (all-risk) |
| Business Personal Property | Broad form (or Special with upgrade) |
| Outdoor Signs | Up to $2,500 included |
| Debris Removal | 25% of loss + $25,000 |
| Preservation of Property | 30 days while removed |
Key Property Features
Blanket Coverage: BOP allows coverage on a blanket basis without 90% coinsurance.
Seasonal Automatic Increase: Personal property limits automatically increase 25% during peak seasons.
Newly Acquired Property:
- Buildings: $500,000 for 180 days
- BPP: $100,000 for 60 days
Business Income: Included automatically with:
- 12 months coverage
- No coinsurance requirement
- Actual loss sustained basis
Valuation
| Property Type | Valuation Method |
|---|---|
| Buildings | Replacement cost |
| Personal Property | Replacement cost |
| Valuable Papers | Research cost |
| Electronic Equipment | Replacement cost |
BOP Liability Coverage
Section II: Liability
The BOP includes Commercial General Liability coverage:
| Coverage | What It Provides |
|---|---|
| Coverage A | Bodily injury and property damage |
| Coverage B | Personal and advertising injury |
| Coverage C | Medical payments |
| Supplementary Payments | Bail bonds, defense costs, lost wages |
Standard Limits
| Limit Type | Amount |
|---|---|
| Each Occurrence | $1,000,000 (typical) |
| General Aggregate | $2,000,000 |
| Products-Completed Operations | $2,000,000 |
| Personal/Advertising Injury | $1,000,000 |
| Damage to Rented Premises | $100,000 |
| Medical Expense | $5,000 |
BOP vs. CPP Comparison
| Feature | BOP | CPP |
|---|---|---|
| Target Market | Small/medium business | All sizes |
| Eligibility | Limited classes | All eligible classes |
| Flexibility | Less flexible | Highly customizable |
| Premium | Lower | Varies |
| Administration | Simplified | More complex |
| Business Income | Automatic | Separate form |
| Causes of Loss | Special (buildings) | Choose form |
| Coinsurance | Optional/waived | Required |
Optional BOP Coverages
Common endorsements available:
| Endorsement | Purpose |
|---|---|
| Employee Dishonesty | Theft by employees |
| Mechanical Breakdown | Equipment failure |
| Outdoor Signs | Higher limits |
| Accounts Receivable | Records loss |
| Valuable Papers | Higher limits |
| Computer Coverage | Data/equipment |
| Hired/Non-Owned Auto | Vehicle liability |
| Employment Practices Liability | EPLI coverage |
| Cyber Liability | Data breach |
Key Exam Points
- Automatic Business Income: 12 months, no coinsurance
- Special Form for Buildings: All-risk coverage included
- Replacement Cost: Default for buildings and BPP
- Eligibility: Know which businesses are INELIGIBLE
- Liability Included: CGL is bundled in the policy
- Simplified Administration: One policy, one premium
Which of the following businesses would typically be INELIGIBLE for a Businessowners Policy (BOP)?
Under a standard BOP, building coverage is written on which causes of loss basis?
Business Income coverage under a BOP provides coverage for up to how many months?
8.1 CGL Policy Overview
Chapter 8: Commercial General Liability