Commercial Property Insurance vs. BOP: Which Do You Need?

Protecting your business property is one of the most important insurance decisions you will make. A fire, theft, or severe storm can destroy equipment, inventory, and physical assets that took years to build. Two of the most common ways to protect against these losses are standalone commercial property insurance and a Business Owner's Policy (BOP). Both cover your physical assets, but they differ significantly in scope, cost, flexibility, and eligibility. Choosing the right option depends on the size of your business, the coverage you need, and how much you want to spend.

This guide breaks down exactly what each option covers, how they compare, when one makes more sense than the other, and what Washington State businesses should keep in mind when making this decision.

What Is Commercial Property Insurance?

Commercial property insurance is a standalone policy that protects the physical assets your business owns or is responsible for. It is a single-purpose policy focused exclusively on property protection.

What It Covers

A standard commercial property policy protects:

• Your building: If you own the structure where your business operates, the policy covers the building itself, including the roof, walls, foundation, and permanent fixtures
• Business equipment: Computers, machinery, tools, manufacturing equipment, and any other equipment used in your operations
• Inventory: Raw materials, work in progress, and finished goods ready for sale
• Furniture and fixtures: Desks, chairs, shelving, display cases, and other furnishings
• Signage: Exterior and interior signs, including illuminated signs
• Tenant improvements: If you lease your space and have invested in build-outs or improvements, these can be covered under your policy
• Documents and records: Paper files, electronic data restoration costs, and valuable papers

Covered Perils

Commercial property insurance typically covers losses caused by:

• Fire and smoke damage: The most common cause of major commercial property losses
• Theft and burglary: Stolen equipment, inventory, or other property
• Vandalism: Intentional damage to your property by third parties
• Windstorms and hail: Damage from severe weather events
• Lightning strikes: Direct strikes and resulting electrical surges
• Falling objects: Debris from construction, trees, or other sources
• Water damage: From burst pipes, accidental discharge, or weight of ice and snow (not flooding)
• Vehicle or aircraft impact: Damage caused by a vehicle crashing into your building or falling aircraft debris
• Explosion: Industrial or other explosions

What It Does Not Cover

Standalone commercial property insurance has important exclusions:

• Flood: Flood damage requires a separate flood insurance policy, typically through the National Flood Insurance Program (NFIP) or a private flood insurer
• Earthquake: Earthquake damage is excluded from standard policies and requires a separate endorsement or policy
• General liability: Property insurance does not cover claims from third parties who are injured at your business or whose property you damage
• Business interruption: Lost income from a covered event is usually not included in a basic property policy unless added as an endorsement
• Wear and tear: Normal aging, deterioration, and maintenance issues are not covered
• Employee dishonesty: Theft by employees typically requires a separate crime or fidelity bond

Understanding these exclusions is critical. Many business owners assume their property policy covers everything, only to discover gaps after a loss.

What Is a Business Owner's Policy (BOP)?

A Business Owner's Policy is a bundled insurance package that combines multiple coverages into a single policy. It was designed specifically for small to mid-size businesses that need broad protection without the complexity of managing several separate policies.

What a BOP Typically Includes

• Commercial property insurance: The same core property coverage described above, protecting your building, equipment, inventory, and other business assets
• General liability insurance: Coverage for third-party claims of bodily injury, property damage, and personal and advertising injury. If a customer slips and falls in your store or you accidentally damage a client's property, general liability responds.
• Business interruption insurance: Also called business income coverage, this pays your ongoing operating expenses and replaces lost profits if a covered event forces you to close temporarily. If a fire shuts down your restaurant for three months, business interruption coverage pays your rent, utilities, loan payments, and the income you would have earned.

Cost Advantage

One of the primary reasons BOPs exist is the cost savings from bundling. Insurance carriers offer BOPs at a discount because packaging coverages together reduces their administrative costs and encourages businesses to carry broader protection. For most qualifying businesses, a BOP costs 15-25% less than purchasing commercial property, general liability, and business interruption coverage as separate policies.

Common Add-Ons

Most BOP policies can be enhanced with optional endorsements:

• Cyber liability: Covers data breach notification costs, credit monitoring for affected customers, legal defense, and regulatory fines
• Hired and non-owned auto: Provides liability coverage when employees use personal vehicles or rental cars for business purposes
• Equipment breakdown: Covers mechanical or electrical breakdown of equipment, boilers, and machinery beyond what the property policy covers
• Professional liability: Errors and omissions coverage for businesses that provide professional services or advice
• Employee dishonesty: Coverage for theft or fraud committed by employees
• Spoilage coverage: Protects perishable inventory from losses due to equipment failure or power outage

These add-ons allow you to customize your BOP while still benefiting from the bundled pricing structure.

Key Differences: BOP vs. Standalone Property

Understanding the specific differences between these two options helps you make a more informed decision.

Coverage Scope

The most fundamental difference is scope. A standalone commercial property policy covers only your physical assets. A BOP includes that same property coverage plus general liability and business interruption. If you only have a property policy, you have no coverage for liability claims, and you have no income replacement if a covered loss forces you to shut down temporarily.

For businesses that need both property and liability protection, which is nearly every business with a physical location, the BOP provides a more complete foundation.

Cost Comparison

BOPs are typically 15-25% cheaper than purchasing equivalent coverages separately. For example, if standalone commercial property costs $150/month and standalone general liability costs $120/month, buying them separately totals $270/month. A BOP with equivalent limits might cost $200-$230/month, including business interruption coverage that you would otherwise need to purchase as an additional endorsement.

The exact savings depend on your industry, location, and coverage limits, but the bundled discount is a consistent feature of BOPs across carriers.

Flexibility

Standalone policies offer greater flexibility. You can select higher property limits without being constrained by a package structure. You can choose different carriers for different coverages if one insurer offers a better property rate while another specializes in liability. You can adjust limits and deductibles independently for each policy.

BOPs, by contrast, come as a package. The property and liability limits are set together, and while endorsements add flexibility, the core structure is less customizable than separate standalone policies. For most small businesses, this is a non-issue because standard BOP limits are adequate. For larger or more complex operations, the constraints may be a drawback.

Business Interruption

Business interruption coverage is included as a standard component of most BOPs. With standalone commercial property insurance, business interruption is typically an optional add-on that increases your premium. This is a significant advantage for BOPs because many business owners who purchase standalone property policies skip business interruption coverage to save money, leaving a dangerous gap if a major loss occurs.

Consider this scenario: a fire destroys your retail space. Your property insurance pays to repair the building and replace your inventory. But while reconstruction takes four months, you still owe rent, loan payments, and employee wages. Without business interruption coverage, those costs come out of your pocket. A BOP covers this by default.

Eligibility

BOPs have eligibility limits that vary by carrier but generally include:

• Revenue thresholds: Most carriers limit BOP eligibility to businesses with annual revenue under $5 million, though some extend to $10 million
• Square footage limits: Typically under 25,000-35,000 square feet per location
• Employee count: Some carriers cap eligibility at 100 employees
• Industry restrictions: High-risk industries like manufacturing, heavy construction, and certain entertainment venues may not qualify

Standalone commercial property insurance has no such restrictions. Any business, regardless of size or revenue, can purchase standalone property coverage.

When Commercial Property Insurance Makes More Sense

Standalone commercial property insurance is the better choice in several situations:

• Your business exceeds BOP eligibility limits: Large operations with revenues above $5-10 million, extensive square footage, or large workforces may not qualify for a BOP and need standalone coverage
• You need very high property limits: If your building, equipment, and inventory are worth millions, standalone policies allow you to set higher limits without being constrained by BOP packaging
• You already have general liability through other arrangements: Some businesses secure liability coverage through professional associations, franchise programs, or industry-specific policies. In these cases, adding a BOP would duplicate your liability coverage unnecessarily.
• You have complex or specialized operations: Businesses with unique risk profiles, such as large-scale manufacturing or warehousing, often need customized property coverage that goes beyond what a standard BOP offers
• You want to shop carriers independently: Splitting your coverages across different carriers allows you to find the best rate for each individual policy

When a BOP Makes More Sense

For the majority of small to mid-size businesses, a BOP is the more practical and cost-effective choice:

• Small to mid-size businesses under $5 million in annual revenue: You fall within the typical eligibility threshold and benefit from bundled pricing
• Businesses needing both property and liability protection: If you have a physical location and interact with customers, clients, or the public, you need both coverages. A BOP delivers them together at a lower cost.
• Budget-conscious business owners: The 15-25% savings compared to separate policies makes a meaningful difference for businesses watching every dollar
• Retail stores, offices, restaurants, and service businesses: These are the business types that BOPs were designed for. Standard limits and coverage structures align well with their risk profiles.
• New businesses: Startups benefit from the simplicity of a single policy that covers the essentials without requiring complex coverage decisions upfront

Washington-Specific Considerations

Washington State businesses face several property risks that require special attention beyond a standard policy.

Earthquake Coverage

Washington sits in a seismically active region. The Cascadia Subduction Zone poses a significant earthquake risk to the entire western part of the state, and the Seattle Fault runs directly through the Puget Sound metropolitan area. Despite this risk, earthquake damage is excluded from both standard commercial property policies and BOPs.

To protect against earthquake losses, you need a separate earthquake endorsement or standalone earthquake policy. Earthquake coverage in Washington is more expensive than in less seismically active states, with deductibles typically ranging from 10-25% of the insured value. Given the potential for catastrophic loss, this coverage is strongly recommended for businesses in western Washington, particularly those in older buildings or unreinforced masonry structures.

Flood Risk

Washington has numerous flood-prone areas, from river valleys in the Cascades foothills to coastal regions along the Pacific. Flood damage is excluded from standard property policies and BOPs. If your business is located in a FEMA-designated flood zone, your lender may require a separate flood insurance policy. Even businesses outside designated flood zones can benefit from flood coverage, as many flood losses occur outside mapped flood areas.

Building Codes and Ordinance Coverage

Washington cities and counties frequently update their building codes. If your building is damaged and needs significant repairs, local code enforcement may require that the entire building be brought up to current code standards, not just the damaged portion. Standard property policies pay to restore your building to its pre-loss condition, which may not satisfy updated building codes.

Ordinance or law coverage, available as an endorsement, pays the additional costs of complying with current building codes during repairs or reconstruction. For businesses in older buildings, this coverage can save tens of thousands of dollars.

How Much Does Each Cost in Washington?

Insurance costs vary based on many factors, but the following ranges provide a general idea of what Washington businesses can expect.

Standalone Commercial Property Insurance

• Small office or retail space (under 2,000 sq ft): $50-$150/month
• Mid-size retail, restaurant, or office (2,000-5,000 sq ft): $150-$300/month
• Larger operations or high-value inventory: $300+/month

Business Owner's Policy (BOP)

• Home-based business with moderate equipment: $50-$100/month
• Small retail or service business: $100-$175/month
• Mid-size restaurant, retail, or office: $150-$200/month

Factors That Affect Your Premium

Several variables influence your specific premium:

• Location: Urban areas with higher property values, crime rates, or fire response times cost more
• Building construction: Fire-resistant construction (steel, concrete) costs less to insure than wood-frame buildings
• Occupancy type: A restaurant with commercial cooking equipment pays more than a professional office
• Building age and condition: Older buildings, particularly those with outdated electrical or plumbing, carry higher premiums
• Security features: Alarm systems, sprinklers, security cameras, and deadbolt locks can earn premium discounts
• Claims history: Businesses with prior property claims may face higher rates
• Deductible selection: Higher deductibles reduce your premium, but increase your out-of-pocket cost when a claim occurs

Make the Right Choice for Your Business

Choosing between commercial property insurance and a BOP does not have to be complicated. For most small to mid-size Washington businesses, a BOP provides the best combination of coverage, convenience, and value. For larger or more specialized operations, standalone policies offer the flexibility to build a customized coverage program.

The most important thing is making sure you have adequate protection in place before a loss occurs. Gaps in coverage are invisible until you need to file a claim, and by then it is too late to fix them.

SmartInsured makes it easy to compare your options. Get a free quote for both commercial property insurance and a BOP, and see which option gives you the best coverage at the best price. You can also call us at 425-209-1206 to speak directly with a licensed agent who can walk you through your choices. We serve businesses across Washington State and are committed to helping you find the right protection for your specific situation.