What is a business owners policy?
A business owners policy, commonly called a BOP, combines certain commercial property and general liability coverage in a single policy for eligible businesses.
Some artisan contractors and smaller contracting businesses may qualify for a BOP. Eligibility depends on the trade, payroll, sales, subcontracted work, premises, property values, loss history and the insurance company’s underwriting guidelines.
Contractors that do not qualify for a BOP may still obtain appropriate coverage through separate commercial property and general liability policies or another commercial package.
Property a contractor may need to insure
A contractor property policy or BOP may be structured to insure:
- An owned office, shop or warehouse
- Tenant improvements and betterments
- Office furniture and computer equipment
- Inventory and supplies at the premises
- Shop machinery and fixed equipment
- Signs
- Records and valuable papers
- Property of others in the contractor’s care when included
The contractor should distinguish property that remains at the premises from tools, mobile equipment and installation materials that travel to jobsites.
Building coverage
Contractors who own their office, shop, warehouse or other commercial building may need building coverage. The insured value should reflect the cost to rebuild the covered structure, subject to the policy’s valuation provisions.
Market value, tax assessment and outstanding loan balance do not necessarily equal the proper insurance value. Building details may include:
- Construction type
- Square footage
- Year built
- Roof age and material
- Electrical, plumbing and HVAC updates
- Occupancy
- Fire protection and distance to a hydrant
- Sprinkler and alarm systems
- Attached and detached structures
Business personal property
Business personal property may include furniture, computers, supplies, inventory and certain machinery at the described premises. Contractors should create an inventory and estimate the replacement cost of the property.
Limits should account for seasonal increases, newly acquired property and the largest amount that could be damaged in one event.
Property away from the described premises may be subject to a small sublimit or may require contractor inland marine insurance .
Tenant improvements and betterments
A contractor leasing office or shop space may invest in walls, flooring, electrical work, cabinetry, fixtures or other improvements. The lease and policy should be reviewed to determine who is responsible for insuring those improvements.
Do not assume the building owner’s policy protects improvements paid for by the tenant.
Business income and extra expense
A covered property loss can interrupt the contractor’s operations even when the physical damage is limited. Subject to policy terms, business income coverage may help replace certain lost income and continuing expenses when operations are suspended because of covered direct physical loss or damage.
Extra expense coverage may help pay certain additional costs incurred to continue operations or reduce the length of a covered interruption.
Contractors should consider:
- How long repairs or rebuilding could take
- Continuing payroll and fixed expenses
- Temporary office or shop costs
- Equipment replacement time
- Seasonal revenue changes
- Dependence on a key supplier or location
General liability within a BOP
A qualifying BOP may include commercial general liability coverage. Subject to policy terms, this may address covered third-party bodily injury, property damage, personal injury, advertising injury and certain completed-operations claims.
Contractor eligibility, classifications and endorsements still matter. A BOP should not be assumed to include every provision needed for residential work, subcontracted work or specialized operations.
Visit the Contractor General Liability page for more information.
Equipment breakdown coverage
Equipment breakdown coverage may help address certain covered sudden and accidental breakdowns involving mechanical, electrical or pressure equipment.
Depending on the contractor’s premises, relevant property might include:
- HVAC systems
- Electrical panels
- Compressors
- Shop machinery
- Computer and communications equipment
- Boilers or pressure vessels
Wear and tear, deterioration and routine maintenance are not the same as a covered equipment breakdown.
Crime and employee dishonesty
A contractor may also need to review crime coverage for risks such as employee theft, forgery, alteration, computer fraud or funds-transfer fraud.
Crime coverage is separate from general liability and is not automatically included at the same limits in every BOP. Coverage should be selected based on who handles money, materials, inventory and financial transactions.
Why mobile tools may need separate coverage
Property coverage in a BOP is generally centered on described premises. Contractor tools and equipment often travel in trucks, trailers or between jobsites.
Those mobile exposures may require:
- Contractor tools and equipment insurance
- Contractor inland marine insurance
- Installation floater coverage
- Builders risk insurance
Shop and fabrication operations
Some contractors perform cutting, welding, woodworking, machining, painting or fabrication at their premises. These activities can affect property and liability eligibility.
Ford Agency should be told about:
- Every shop operation
- Machinery and equipment used
- Welding or other hot work
- Paints, solvents, fuels and compressed gases
- Dust collection and ventilation
- Spray finishing
- Flammable-material storage
- Products manufactured or fabricated for others
More substantial manufacturing or fabrication may require coverage outside a standard contractor BOP.
Property valuation and coinsurance
Commercial property policies may contain valuation and coinsurance provisions. If insured values are too low, the contractor may not receive the expected amount after a covered partial loss.
Contractors should review:
- Replacement cost versus actual cash value
- Building and contents limits
- Coinsurance percentages
- Agreed-value provisions when available
- Inflation protection
- Deductibles
- Ordinance or law coverage
Common limitations to review
Contractor property and BOP policies may contain limitations or exclusions involving:
- Flood or surface water
- Earth movement
- Wear and deterioration
- Vacancy
- Property away from the premises
- Outdoor property
- Employee dishonesty
- Cyber incidents
- Pollution
- Utility service interruption
- Ordinance or law costs
Some exposures may be addressed through endorsements or separate policies. Others may remain excluded.
What affects property and BOP pricing?
Eligibility and pricing may be influenced by:
- Contractor trade and operations
- Annual sales and payroll
- Subcontracted cost
- Property location
- Building construction and age
- Occupancy and neighboring businesses
- Building, contents and improvement values
- Fire and theft protection
- Shop and fabrication activities
- Business income limits
- Prior property and liability losses
What to send Ford Agency
Useful information for a contractor property or BOP review includes:
- Property address and occupancy
- Ownership or lease information
- Building construction, age and square footage
- Roof, electrical, plumbing and HVAC updates
- Building replacement-cost estimate when available
- Business personal property values
- Tenant improvement values
- Shop machinery and fixed-equipment details
- Fire, theft and sprinkler protection
- Business income and extra expense needs
- Detailed shop or fabrication operations
- Current coverage and recent loss history