14.1 Businessowners Policy (BOP) in Depth
Key Takeaways
- The Businessowners Policy (BOP) is a pre-packaged commercial program bundling property, business income, and general liability for small and mid-sized eligible classes on ISO form BP 00 03.
- Eligibility is driven by class and size limits; auto dealers/repair, bars, most manufacturers, banks, and oversized buildings are ineligible.
- BOP buildings and business personal property are written automatically on a Special (open-peril) basis at replacement cost.
- Business income and extra expense are automatic for 12 months on an actual-loss-sustained basis with no coinsurance and no 72-hour waiting period.
- Liability mirrors the CGL with a $1M occurrence / $2M aggregate structure, $5,000 medical payments, and defense costs paid outside the limits.
What the BOP Is
The Businessowners Policy (BOP) is a pre-packaged commercial program that bundles property, business income, and liability for small to mid-sized businesses. Where the Commercial Package Policy (CPP) is hand-assembled from separate coverage parts, the BOP combines coverages with generous automatic features and simplified, class-based rating. The current standard contract is Insurance Services Office (ISO) form BP 00 03.
Think of the BOP as the commercial cousin of the homeowners policy: a packaged product for owners who do not employ a risk manager.
Eligibility
Eligibility turns on class of business and size. The risk must appear on the eligible-class list and stay within stated building-size, revenue, and height limits.
| Factor | Typical limit |
|---|---|
| Building size | Generally up to ~35,000 sq ft (varies by class) |
| Annual sales | Commonly capped near $3M-$15M per class |
| Stories | Usually 6 or fewer for office/apartment |
| Class | Must be on the eligible list |
Ineligible Classes
| Class | Why ineligible |
|---|---|
| Auto dealers / repair | Need a Garage or Auto form |
| Bars and taverns | Heavy liquor liability |
| Manufacturers (most) | Complex products exposure |
| Banks / financial institutions | Specialized forms |
| Oversized / tall buildings | Exceed size or height limits |
Section I - Property
The property section is what makes the BOP attractive: coverages that each need a form or endorsement on a CPP are built in.
| Feature | BOP automatic provision |
|---|---|
| Building | Special (open-peril) form |
| Business personal property (BPP) | Special form |
| Valuation | Replacement cost (buildings and BPP) |
| Business income & extra expense | 12 months, no coinsurance, actual loss sustained, no waiting period |
| Seasonal increase | BPP limit auto-rises 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 edge; the CPP needs a separate CP 00 30 with a coinsurance election and a 72-hour wait.
Built-In Coverages a CPP Would Charge For
Beyond the headline features, the BOP bundles several smaller automatic coverages that a CPP prices separately, which is why a BOP often costs less than the sum of equivalent monoline coverages.
| Built-in coverage | Typical automatic amount |
|---|---|
| Money & securities (limited) | Modest on/off-premises sublimit |
| Forgery or alteration | Included sublimit |
| Fire department service charge | Included |
| Pollutant cleanup | Per-period sublimit |
| Business income from dependent property | Limited automatic amount |
| Electronic data / valuable papers | Small sublimits |
How a BOP Is Rated
BOP rating is class-rated, not judgment-rated: the insurer slots the risk into a published class (office, apartment, retail), applies a rate per $1,000 of property value or per square foot, and adds liability by class and limit. Simplified rating makes BOPs quick to quote and issue, the trade-off being rigid eligibility. A risk that outgrows the size or revenue caps, or shifts to an ineligible class (a retailer that begins manufacturing), must move to a CPP.
Section II - Liability
Liability mirrors the Commercial General Liability (CGL) coverage part: third-party bodily injury (BI), property damage (PD), and personal and advertising injury (P&AI), with defense costs paid in addition to the limits.
| Limit | Typical amount |
|---|---|
| Each occurrence | $1,000,000 |
| General aggregate | $2,000,000 |
| Products-completed operations aggregate | $2,000,000 |
| Damage to premises rented to you | $50,000-$100,000 |
| Medical payments (no-fault) | $5,000 per person |
BOP vs. CPP
| Feature | BOP | CPP |
|---|---|---|
| Target | Small / mid business | Any size |
| Eligibility | Limited classes | Broad |
| Business income | Automatic, 12 mo, no coinsurance | Separate CP 00 30 + coinsurance |
| Building causes of loss | Special, automatic | Choose Basic/Broad/Special |
| Valuation | Replacement cost default | ACV default unless RC elected |
Worked Numeric Example
A 12,000-square-foot accounting firm with $2M revenue suffers a kitchen fire and closes four months. The building and contents settle at replacement cost on a Special basis; business income pays the four-month loss with no coinsurance test and no 72-hour wait. If $90,000 of income is lost over those four months, the BOP pays the full $90,000 (less any deductible). The same firm on a CPP would need the right CP 00 30 coinsurance percentage and would face the waiting period.
Common Traps
- BOP building coverage is Special / replacement cost automatically - do not apply the BPP's ACV default.
- Auto dealers/repair, bars, and manufacturers are ineligible; a restaurant with limited alcohol generally is eligible.
- BOP business income has no coinsurance and no waiting period, unlike CP 00 30's 72-hour wait.
- Outgrowing size/revenue limits or changing to an ineligible class forces a move to a CPP.
Under a standard Businessowners Policy, how are the building and business personal property valued and what causes-of-loss basis applies?
Which business would typically be INELIGIBLE for a BOP?