7.5 Businessowners Policy (BOP)
Key Takeaways
- The BOP is a pre-packaged policy for small to mid-sized businesses that bundles property, liability, and business income with broad automatic features.
- BOP eligibility is class- and size-driven: typically apartment, office, mercantile, processing/service, and limited contractor risks within stated building-size and revenue limits.
- BOP building and business personal property are written on a Special (open-peril) basis at replacement cost — automatically, without a separate causes-of-loss choice.
- Business income and extra expense are included automatically for 12 months on an actual-loss-sustained basis with no coinsurance and no waiting period.
- Ineligible classes include auto dealers and repair, bars/taverns, manufacturers, banks, and large or tall buildings exceeding the program limits.
What a BOP Is
The Businessowners Policy (BOP) is a pre-packaged policy that combines property and liability (and business income) for small and mid-sized businesses. Unlike the hand-built CPP, the BOP's coverages are bundled with generous automatic features and simplified rating. Think of it as the commercial cousin of the homeowners policy.
Eligibility
Eligibility is driven by class of business and size. ISO's BOP program is designed for apartment buildings, office, mercantile (retail), processing and service, and certain limited contractor and wholesale risks within stated limits.
| Factor | Typical limit |
|---|---|
| Building size | Generally up to ~35,000 sq ft (varies by class; larger for some) |
| Annual sales | Often capped (commonly in the $3M–$15M range per class) |
| Number of stories | Usually 6 or fewer for office/apartment |
| Class | Must appear on the eligible-class list |
Ineligible Classes
| Class | Reason |
|---|---|
| Auto dealers / repair | Need a Garage / Auto coverage form |
| Bars and taverns | High liquor liability |
| Manufacturers (most) | Complex products exposure |
| Banks / financial institutions | Specialized forms |
| Large or tall buildings | Exceed size/height limits |
| Condominium associations | Specialized association forms |
Section I — Property
The BOP's property section is what makes the product attractive: coverages that on a CPP would each need a form or endorsement are built in.
| Feature | BOP automatic provision |
|---|---|
| Building | Special (open-peril) form |
| Business personal property | Special form |
| Valuation | Replacement cost (buildings and BPP) |
| Business income & extra expense | 12 months, no coinsurance, actual loss sustained, no waiting period |
| Debris removal | Built in |
| Seasonal increase | Personal property limit auto-increases up to 25% in peak season |
| Newly acquired buildings | Limited automatic coverage (commonly up to $250,000) |
The 12-month, no-coinsurance, actual-loss-sustained business income is the BOP's signature advantage — the CPP requires a separate CP 00 30 form with a coinsurance election.
Section II — Liability
The BOP bundles commercial general liability comparable to the CGL coverage part.
| Coverage | Provides |
|---|---|
| Bodily injury & property damage | Third-party injury/damage |
| Personal & advertising injury | Libel, slander, false arrest, advertising torts |
| Medical payments | No-fault medical, often $5,000 per person |
| Damage to premises rented to you | Fire/limited perils, commonly $50,000–$100,000 |
| Limit | Typical amount |
|---|---|
| Each occurrence | $1,000,000 |
| General aggregate | $2,000,000 |
| Products-completed operations aggregate | $2,000,000 |
BOP vs. CPP
| Feature | BOP | CPP |
|---|---|---|
| Target | Small / mid business | Any size |
| Eligibility | Limited classes | Broad |
| Flexibility | Pre-packaged | Highly customizable |
| Business income | Automatic, 12 mo, no coinsurance | Separate form + coinsurance |
| Building causes of loss | Special, automatic | Choose Basic/Broad/Special |
| Valuation | Replacement cost default | ACV default unless RC elected |
Optional Endorsements
Common add-ons broaden the BOP: employee dishonesty/crime, mechanical breakdown (equipment), higher outdoor-sign limits, accounts receivable and valuable papers, hired and non-owned auto liability, employment practices liability (EPLI), and cyber/data-breach coverage.
Worked Scenario
A 12,000-square-foot accounting firm with $2M revenue suffers a kitchen fire and closes for four months. Under a BOP, the building and contents settle at replacement cost on a Special basis, and business income pays the four-month loss automatically — no coinsurance test and no 72-hour waiting period to satisfy. The same firm on a CPP would need a CP 00 30 with the right coinsurance and would face the 72-hour wait.
Two BOP Tiers: Standard and Special
Historically ISO offered a Standard BOP and a Special BOP, and many insurers still file similar tiers. The practical exam takeaway is that the modern ISO Businessowners Coverage Form (BP 00 03) writes property on an open-peril basis comparable to the Special causes-of-loss form, with named-peril language available as a lower-cost alternative. The automatic open-peril, replacement-cost combination is the single most-tested BOP advantage.
Built-In Coverages That Would Cost Extra on a CPP
Beyond the headline features, the BOP packs in several smaller automatic coverages that a CPP would charge for separately:
| Built-in coverage | Typical automatic amount |
|---|---|
| Money & securities (limited) | Modest on/off-premises limit |
| Forgery or alteration | Included limit |
| Fire department service charge | Included |
| Pollutant cleanup | Per-period sublimit |
| Business income from dependent property | Limited automatic amount |
| Fire extinguisher recharge / electronic data | Small sublimits |
This bundling is why a BOP often costs less than the sum of equivalent monoline coverages while still delivering broad protection — exactly the value proposition for a small business owner who does not employ a risk manager.
How Underwriters Rate a BOP
BOP rating is class-rated rather than judgment-rated: the insurer slots the risk into a published class (for example, an office, a restaurant, or an apartment), applies a rate per $1,000 of property value and per square foot or per unit, and adds liability based on class and limits. Because rating is simplified, BOPs are quick to quote and issue — the trade-off being the rigid eligibility rules. A risk that outgrows the size or revenue limits, or changes to an ineligible class (for example, a retailer that begins manufacturing), must move to a CPP.
Liability Coverage in Depth
The BOP's liability section mirrors the CGL: it pays sums the insured becomes legally obligated to pay as damages for bodily injury, property damage, and personal and advertising injury, and it defends the insured even against groundless suits, with defense costs paid in addition to the limits. The general aggregate caps total payouts in the policy year, while the each-occurrence limit caps any single claim. Medical payments (often $5,000) are paid without regard to fault, encouraging quick goodwill settlements that head off larger liability suits.
Common Traps
- BOP building coverage is Special / open-peril and at replacement cost automatically — do not confuse it with the BPP's ACV default.
- Auto dealers/repair, bars, and manufacturers are ineligible; a restaurant with limited alcohol sales generally is eligible.
- BOP business income has no coinsurance and no waiting period, unlike the CP 00 30 form's 72-hour wait.
- Defense costs are paid in addition to the liability limits, just as under the CGL.
- Outgrowing size/revenue limits or changing to an ineligible class forces a move from BOP to CPP.
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?
How is business income coverage provided under a standard BOP?
Compared with the BPP form's default valuation, how does a BOP value buildings and business personal property?