Here's the thing about insurance as a general contractor: everyone tells you that you need it, but nobody explains which route actually makes sense for your business. Should you bundle everything into a Business Owner's Policy (BOP), or buy general liability and property coverage separately? The answer isn't one-size-fits-all, and picking wrong can either leave you underinsured or overpaying for coverage you don't need.
The reality is that most general contractors won't even qualify for a BOP—construction is considered high-risk, and BOPs are designed for small, low-risk businesses. But if you're a smaller contractor just starting out or running a specialized operation, a BOP might save you serious money. Let's break down exactly when each option makes sense and what it'll actually cost you.
What's Actually in a BOP vs Standalone Policies?
A Business Owner's Policy bundles three critical coverages into one package: general liability insurance (which covers bodily injury and property damage you cause to others), commercial property insurance (which protects your tools, equipment, and workspace from theft, fire, or weather damage), and business interruption coverage (which replaces lost income if you can't work due to a covered incident).
When you buy standalone policies, you're purchasing each of these coverages separately. You'll get general liability insurance to cover third-party claims, then add commercial property insurance if you own expensive tools or lease a shop, and potentially business interruption coverage if losing work for a week would put you in financial trouble. The coverage itself is essentially identical—the difference is in how it's packaged, priced, and who qualifies.
Standard BOP limits typically include $1 million per occurrence and $2 million aggregate for liability, plus property coverage ranging from $100,000 to $500,000 depending on your asset values. If you need higher limits to meet contract requirements or you're working on commercial projects, you'll likely need standalone policies with customizable limits that BOPs can't provide.
Do You Even Qualify for a BOP as a General Contractor?
This is where most contractors hit a wall. Insurance companies classify construction as a high-risk industry, which immediately disqualifies many general contractors from BOP coverage. The standard eligibility requirements are strict: you typically need fewer than 100 employees, less than $6 million in annual gross sales, and no locations exceeding 35,000 square feet. More importantly, you must operate in a low-risk industry.
If you're a demolition contractor, work in transportation, or handle oil and gas projects, you're automatically excluded. But smaller contractors doing residential remodeling, finish work, or specialized trades sometimes do qualify—especially if you work primarily from client sites rather than maintaining a large commercial space. The key is that your specific operations have to fall within the insurer's acceptable risk tolerance.
Even if you qualify now, your eligibility can change as your business grows. Land that first big commercial contract? Hire your sixth employee? Cross $6 million in revenue? You might suddenly find yourself needing to switch to standalone policies. This is why it's critical to review your insurance structure annually, not just when you're shopping for the lowest premium.
The Real Cost Difference: BOP vs Standalone
If you qualify for a BOP, you're looking at around $100 to $121 per month on average—that's $1,200 to $1,455 annually. This covers your general liability, property, and business interruption all in one package. Compare that to buying general liability alone at about $80 per month, and you're only paying $20-40 more per month to add significant property and income protection.
Here's where the savings get real: bundling through a BOP typically saves you 15% to 30% compared to buying general liability and commercial property coverage separately. That works out to about $78 per month in savings for most contractors. If you then add workers' compensation insurance (which you'll need separately regardless), you can stack another 10-15% multi-policy discount on top.
But those savings only matter if you actually qualify. If you don't meet BOP eligibility requirements, you'll be buying standalone policies anyway. In that case, expect to pay around $256 per month for general liability alone, plus additional costs for commercial property coverage based on your equipment value and business interruption coverage if you want income protection. For contractors who need the full suite of standalone coverages, you're looking at significantly higher monthly premiums than a BOP would cost—but you also get higher limits and more customization options.
When to Switch from BOP to Standalone or CPP
You'll know it's time to ditch your BOP when you start outgrowing its limitations. The clearest sign is when clients require higher liability limits than your BOP provides—commercial projects often demand $2 million or $5 million per occurrence, and BOPs cap out around $2 million aggregate. If you're turning down work because your insurance limits don't meet contract requirements, you need standalone policies with customizable limits.
Another trigger is when you need specialized coverages that BOPs don't offer. Managing multiple crews? You'll need Employment Practices Liability Insurance (EPLI) to protect against wrongful termination or discrimination claims. Providing design recommendations or project management? You need Errors & Omissions (E&O) coverage, which isn't included in standard BOPs. At this point, you're better off with a Commercial Package Policy (CPP) that lets you build exactly the coverage stack your operation requires.
Business growth is the third major reason to switch. Once you exceed BOP eligibility thresholds—whether it's revenue, employee count, or square footage—you won't have a choice. But even before you hit those hard limits, rapid growth often means your risks are evolving faster than a one-size-fits-all BOP can handle. If you're taking on higher-value projects, managing subcontractors, or expanding into new service lines, the flexibility of standalone policies becomes worth the higher cost.
How to Decide What's Right for Your Contracting Business
Start by honestly assessing your current risk profile and business size. If you're a solo contractor or small crew doing residential work, you have less than $1 million in annual revenue, and you don't own a lot of expensive equipment, ask your insurance agent specifically about BOP eligibility. The potential savings are too significant to ignore if you qualify.
Review your client contracts to see what insurance limits they require. If you're consistently seeing $2 million+ liability requirements, or if clients ask for specific additional insured endorsements that BOPs can't accommodate, standalone policies are your only option. Don't try to force a BOP to work when your contracts demand more—you'll end up underinsured and potentially in breach of contract.
