What Does BPP Mean in Insurance? Coverage Explained

Business Personal Property (BPP) in insurance refers to the movable assets a company owns and utilizes in its daily operations. This coverage is a fundamental component of commercial property insurance, safeguarding the physical items that enable a business to function. Understanding BPP is important for businesses to ensure their operational assets are adequately protected against various risks.

Understanding Business Personal Property (BPP)

Business Personal Property (BPP) encompasses tangible property owned by a business that is not permanently attached to real estate. An item attached to a building is still BPP if it can be removed without significant damage. This distinguishes BPP from real property, which includes land, buildings, and structures that are permanently affixed. For instance, the physical building where a business operates is real property, while the desks, computers, and specialized machinery inside are considered BPP.

A common way to conceptualize BPP is to imagine turning a business building upside down; anything that falls out would generally be considered business personal property. This includes items like office furniture, computers, manufacturing equipment, inventory, and tools. Protecting these items is important because they represent the operational assets that drive a business’s revenue and daily activities. BPP insurance cannot be purchased as a standalone policy; it is usually part of a commercial property insurance policy or a Business Owner’s Policy (BOP).

Types of Assets Covered by BPP Insurance

Business Personal Property insurance covers a broad array of tangible assets. These categories include furniture and fixtures, which encompass items like desks, chairs, shelving, display cases, and non-structural lighting.

Machinery and equipment also fall under BPP coverage, ranging from computers, printers, and point-of-sale (POS) devices to specialized manufacturing tools, production lines, and kitchen appliances in a restaurant setting. Inventory, including raw materials, work-in-progress, and finished goods held for sale, is another significant component. For retail businesses, this might include clothing, books, or food products.

Tenant improvements and betterments are also covered by BPP insurance. These are upgrades or modifications made by a tenant to a leased space, such as built-in cabinetry, specific flooring, or custom lighting, which become a permanent part of the real estate. Supplies like office supplies, cleaning supplies, and packaging materials are included.

Valuation and Coverage Aspects of BPP

Two primary valuation methods are used for Business Personal Property: Actual Cash Value (ACV) and Replacement Cost Value (RCV). ACV policies pay the replacement cost of an item minus depreciation. This method generally results in lower premiums but may not provide sufficient funds to replace older equipment with new items.

Replacement Cost Value, conversely, covers the cost to replace damaged property with new property of like kind and quality, without deduction for depreciation. While RCV policies have higher premiums, they offer better protection by ensuring a business can fully replace its assets and resume operations. Most BPP policies include coinsurance clauses, often requiring coverage limits to be 80% or 90% of the total value of the covered property to avoid penalties during a claim.

Policy limits represent the maximum amount an insurer will pay for a covered loss, determined by the estimated total value of all BPP at a location. Deductibles are the amount the policyholder must pay before the insurance coverage begins to pay for a claim. Accurate inventory and valuation are important to ensure adequate coverage and prevent underinsurance or overinsurance.

Typical Exclusions and Limitations in BPP Policies

BPP policies contain several exclusions and limitations. Land and buildings are excluded, as they are considered real property and require separate commercial property insurance. Vehicles, including business automobiles and trucks, are excluded and are covered under a commercial auto insurance policy.

Money and securities, such as cash, checks, and financial instruments, require specialized coverage, often through a crime insurance policy. Data and electronic information, including software, electronic data, and intellectual property, are not considered tangible BPP and are excluded; coverage for these requires cyber insurance or specific policy endorsements. Property taken off the insured premises, such as tools used at a client site, may have limited or no coverage unless an endorsement for “property off-premises” or “property in transit” is added.

BPP policies also exclude certain perils, such as damage from floods, earthquakes, war, or nuclear hazards. These risks necessitate purchasing separate policies or specific endorsements. Exclusions exist because these items are covered by other specialized policies, present inherent risks, or are non-tangible assets that fall outside the scope of standard BPP coverage.