Business Owners Policy (BOP): What It Bundles, Who Qualifies and What It Leaves Out

The California Department of Insurance (CDI) describes a BOP as "a combination commercial policy that covers property, general liability and business interruption," designed specifically for small businesses. CDI commercial insurance guide.

Insurance Services Office (ISO) publishes a businessowners program: a coverage form, eligibility rules and optional endorsements. Its program overview, dated February 11, 2025, calls the ISO BOP "a self-contained package policy offering broad property and liability coverage designed for small and midsize 'Main Street' businesses." ISO businessowners program overview.

Your insurer may not use ISO's wording. In Texas, the Department of Insurance (TDI) says commercial property policies are not standardized and insurers are free to use their own policies, subject to approval by the Texas Commissioner of Insurance. Treat the ISO details below as a reference model, then check them against your own proposal. TDI commercial insurance overview.

Property: the building and what is inside it

ISO's coverage form includes building and business personal property coverage, plus additional coverages and extensions. ISO businessowners program overview. TDI notes that business owners who lease their space may buy policies that protect the building's contents, "such as machinery, furniture and stored or displayed merchandise." TDI commercial insurance overview.

Whether you need building coverage at all depends on what you own and what your lease makes you responsible for. Ask the insurer to match the building and contents limits to those facts.

If you rent, check what the landlord insures. The NAIC cautions tenants not to rely on the landlord to cover business property, because the building is typically insured only for the basic structure and common areas. Read the lease for insurance requirements as well. NAIC small business insurance guide.

Valuation and insurance to value

How a loss is valued changes what you receive. TDI explains that replacement cost coverage pays to repair or replace property at current costs, while actual cash value pays replacement cost minus depreciation and might not pay enough to fully rebuild. TDI commercial property insurance guide.

ISO's overview says its BOP generally pays on a replacement cost basis, but with an 80% insurance-to-value requirement that an optional endorsement can waive. It also lists property generally settled at actual cash value, such as used merchandise and property of others. CDI explains the consequence of underinsuring a building: if it is not insured to value, "you can be subject to a monetary penalty at the time of a loss," commonly called coinsurance. ISO businessowners program overview · CDI commercial insurance guide.

Before you choose a property limit, work through our business property coinsurance questions.

Business income and extra expense

The New York Department of Financial Services (DFS) says business interruption, or business income, insurance "can provide sufficient funds to pay your fixed expenses and lost business income during a period of time when your business is not operational." NY DFS small business insurance information.

These are "time element" coverages. CDI describes them as insurance for other losses stemming from a direct loss by a covered peril to business property, so the starting point is usually covered physical damage. CDI commercial insurance guide.

ISO's form shows the details to look for in any proposal. According to the ISO businessowners program overview:

• Business income covers the actual loss sustained during the period of restoration that occurs within 12 consecutive months after the physical loss.
• Extended business income can continue for up to 60 additional days after operations resume.
• Extra expense covers necessary costs to avoid or minimize a suspension of business.
• Civil authority coverage applies when a government order blocks access to your premises because of damage to other property, beginning 72 hours after that order.
• The period of restoration carries a 72-hour time period deductible, which an optional endorsement can replace with zero hours.

Ask whether your proposal uses the same time periods. An income claim also depends on records, so it helps to organize your property and financial records before a loss.

Liability

The liability section of ISO's BOP covers sums the insured becomes legally obligated to pay as damages because of bodily injury, property damage or personal and advertising injury. In ISO's design, defense costs are paid outside the limits of insurance. It also includes medical expenses for accidents regardless of fault, with a $5,000 per-person limit that can be increased to $10,000. ISO businessowners program overview.

Read the limits closely. ISO's basic liability limit is $300,000 per occurrence, with options of $500,000, $1,000,000 or $2,000,000. The aggregate limit is twice the per-occurrence limit, and a separate products-completed operations aggregate is also twice that limit. A business required by a lease or contract to carry a particular limit should confirm which option the proposal shows. ISO businessowners program overview.

For background on bodily injury, property damage and personal and advertising injury claims, see our general liability coverage guide.

Eligibility is the first filter. The NAIC gives the example of a factory or a jewelry store, which because of their unique risks "usually require more customized coverage than what's included in a standard BOP." It also notes that many insurers customize BOPs for specific types of businesses. NAIC small business insurance guide.

CDI says a BOP is written with strict underwriting guidelines, including maximum allowable square footage for office, retail or apartment risks. It describes the policy as most appropriate for small "main street" businesses such as hardware stores, barbershops, greeting card shops, accountant offices or low-density apartment houses. CDI commercial insurance guide.

ISO's eligibility rules as an example

ISO's overview lists eligible business types including apartments, auto service, contractors, convenience and grocery stores, light manufacturing, hotels and motels, retail (including internet retailers), offices, processing and service businesses, restaurants, self-storage facilities, and wholesale and distribution businesses. For most eligible risks, ISO applies a size limit of 35,000 square feet of total floor area and $6,000,000 in annual gross sales at each location. ISO businessowners program overview.

Some business types have their own criteria in the same document. Contractors are limited to $300,000 in annual payroll, no exterior work above three stories, subcontracted work of no more than 10% of annual gross sales, and no renting or leasing equipment to others. Restaurants are generally limited to 7,500 square feet, with seating and alcohol-sales caps that vary by restaurant type. Offices are limited to 100,000 square feet and six stories. ISO businessowners program overview.

These are ISO's program rules as described in its February 2025 overview. An insurer using its own program can apply different ones, so ask which rule decides your application and keep the answer in writing.

If your business falls outside BOP rules

The same types of coverage are sold in other ways. CDI explains that commercial property can be sold as a monoline (single-line) policy or as part of a commercial package policy (CPP), which combines two or more commercial coverage parts such as commercial property, general liability and commercial auto. CDI commercial insurance guide.

Endorsements add, limit or remove coverage. ISO's overview describes "numerous optional coverage and exclusionary endorsements" that let underwriters tailor a BOP. It also lists optional coverages available "for an additional charge": outdoor signs, money and securities, employee dishonesty and equipment breakdown. Names and availability vary by insurer. The examples below are drawn from that overview. ISO businessowners program overview.

Source for the table: ISO businessowners program overview. Some endorsements add duties as well as coverage. ISO's protective safeguards endorsement, for example, requires the insured to maintain the protective devices or services listed in its schedule, such as an automatic fire alarm. Ask what any endorsement on your proposal requires you to do.

Three of our articles work through specific endorsement questions: restaurant refrigerator failure separates spoilage, equipment and income losses; contractor tools away from the shop covers equipment that travels; and our cyber insurance guide explains when a standalone cyber policy is worth comparing with an endorsement.

The NAIC says a BOP typically does not include commercial auto insurance, workers' compensation, health or disability insurance, or liability insurance for claims of wrongful professional practices. NAIC small business insurance guide.

• Commercial auto. ISO's hired and non-owned auto endorsement provides excess liability for rented vehicles and vehicles the business does not own. Vehicles your business owns or leases need their own review; see our commercial auto insurance guide.
• Workers' compensation. Treat it as separate coverage, and check your state's employer rules in our workers' compensation coverage guide.
• Professional liability. Claims over errors in professional services are the subject of professional liability, also called errors and omissions (E&O), coverage. ISO's program does include class-specific professional liability endorsements for some trades, such as barber shops and hair salons, printers and veterinarians, so ask whether one applies. ISO businessowners program overview. Our professional liability guide explains the separate policy.
• Health and disability insurance. These are also on the NAIC's list of coverages a BOP typically leaves out.

Flood, earthquake and other excluded perils

FEMA's National Flood Insurance Program (NFIP) says most business insurance does not cover flood damage. NFIP commercial flood insurance offers building and contents coverage of up to $500,000 each. FloodSmart: buy a flood policy.

Earthquake is a similar gap. CDI says earth movement (including earthquake) and flood are two common perils excluded under open perils coverage. ISO's program offers optional earthquake and flood endorsements, so ask whether your insurer offers either and on what terms. CDI commercial insurance guide · ISO businessowners program overview.

Local rules can create other gaps. TDI warns that a commercial property policy for a business on the Texas coast, or in Harris County on Galveston Bay, probably does not cover wind and hail damage. TDI commercial property insurance guide.

Your premium comes from the insurer's rating of your business. CDI explains that once the rating exposures are identified and deductibles selected, usually from your application, "the premium is calculated by a simple formula: rate x exposure = premium." CDI commercial insurance guide.

The NAIC says a BOP can be a less costly option than buying individual policies for many small businesses, and CDI says the premium for qualifying businesses can be very competitive. Neither is a promise for your business, so compare actual proposals on the same terms. NAIC small business insurance guide · CDI commercial insurance guide.

Regulators and ISO's program point to these price drivers:

• Type of business. The NAIC says the type of business "greatly influences liability premiums" and that business interruption costs are tied to the type of business you operate. NAIC small business insurance guide.
• Building, location and fire protection. NY DFS lists location, age and type of building, use of the building, local fire protection, choice of deductibles, discounts, and the scope and amount of insurance you buy. NY DFS small business insurance information.
• Deductibles. CDI says the higher the deductible, the lower the rate, but cautions against choosing deductibles so large they jeopardize the company's finances. ISO's model property deductible is $500, with fixed options from $250 to $10,000 and percentage deductibles of 1%, 2% or 5% for windstorm or hail. CDI commercial insurance guide · ISO businessowners program overview.
• Safety, security and maintenance. TDI says improving these might lower your risk of a claim, which can help you save on premiums. TDI commercial property insurance guide.
• The insurer and the coverage selected. TDI notes that coverage and rates vary by company, and that a cheaper policy might provide less coverage. TDI commercial property insurance guide.

Cutting the property limit to lower the premium can backfire if the policy has an insurance-to-value or coinsurance condition, as described in the valuation section above.

1. List each location, its square footage, your annual sales, payroll and operations. These are the facts BOP eligibility rules turn on.
2. Ask each insurer or agent whether you qualify, which policy form applies, and which endorsements are included.
3. Line up limits, deductibles, valuation terms, business income time periods and endorsements side by side. The quote-comparison worksheet keeps those terms and your open questions in one place.
4. Read the declarations, form and endorsements before accepting. Our BOP proposal review worksheet walks through each section, and the policy-reading guide explains the documents.

Request coverage help if you would like PolicyBenchmark to follow up about your BOP questions.