Business Owners Policy (BOP): What It Covers and Who It Fits

Every part has limits and exclusions. The property and income coverages pay only when the cause of the damage is covered, so if the policy excludes the cause (an earthquake, for example), the lost income usually isn't covered either.

BOP forms also differ from carrier to carrier. Mercury's small business policy lists employee dishonesty coverage and an optional equipment breakdown add-on, while Travelers offers options like hired and non-owned auto, cyber, crime and contractors' equipment. We compare those details, not just the premium.

The California Department of Insurance (opens in a new tab) calls BOPs most appropriate for small "main street" businesses, with hardware stores, barbershops and accounting offices as its examples, and notes they're written under strict underwriting guidelines such as a maximum square footage.

Carrier lists vary. Mercury Insurance names health care practices, professional services, restaurants, retail stores and service businesses among those its small business policy insures, and Travelers' BOP list runs from retail and restaurants to contractors and wholesalers. Businesses with heavier hazards, or that outgrow a program's size limits, usually end up with separate policies.

What carriers ask before quoting

• What the business does, described in detail
• Annual revenue and number of employees
• Square footage, and whether you own or lease the space
• The building's construction, age, roof and fire protection
• Claims in the past several years

• Employee injuries: California requires workers' compensation once you have an employee, and it's always a separate policy.
• Business vehicles: cars, vans and trucks the business owns need commercial auto. Some BOPs can add hired and non-owned auto liability for rentals and employees' own cars.
• Professional mistakes: errors in advice or professional services call for professional liability, also called errors and omissions.
• Earthquake and flood: the CDI notes these are commonly excluded from open-perils commercial property coverage.
• Liquor liability: if you sell or serve alcohol, those claims are usually excluded unless you add liquor coverage.
• Employment claims: harassment or wrongful termination suits need employment practices liability.

If you only need liability, say you consult at clients' offices and own little equipment, a standalone general liability policy may be all you need.

Picture a kitchen fire that closes a café for two months. Property coverage pays for the repairs. Business income replaces the profit the café would have earned and covers bills that keep coming, like rent and payroll. If the owner rents a commissary kitchen to keep catering orders going, extra expense can help pay for it.

Check two details on any quote: how long income is covered (often up to 12 months, with longer options from some carriers) and whether a waiting period applies before payments start.

Insure to value. The California Department of Insurance warns that a building not insured to value can mean a monetary penalty at the time of a loss. Use today's cost to rebuild or replace, not what you paid, and update it as you add equipment or inventory.

Wildfire. Carriers look closely at wildfire exposure in parts of California, and a building near brush can be hard to place. When standard carriers say no, the California FAIR Plan runs a businessowners program for businesses that can't find coverage in the normal market.

Your lease. Commercial leases usually spell out liability limits and ask you to name the landlord as an additional insured. Send us the insurance section before we quote so the BOP matches it. Valley owners will find local license and permit notes on our Santa Clarita business insurance page.

For the full set of policies a small business may need, start with business insurance in California.