Property and Casualty Insurance Practice Exam

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Which of the following restrictions applies to the size and sales of a business insured under a BOP?

Cannot exceed 50,000 square feet or $5 million in sales
Cannot exceed 25,000 square feet or $3 million in sales
Cannot exceed 20,000 square feet or $2 million in sales
No restrictions on size or sales

The correct answer is: Cannot exceed 25,000 square feet or $3 million in sales

A Business Owners Policy (BOP) is specifically designed to provide coverage for small to medium-sized businesses, and it indeed comes with certain restrictions regarding the business's size and sales volume to qualify for this type of insurance. The correct answer highlights those restrictions. The limit of 25,000 square feet and $3 million in sales reflects the intended demographic for BOPs, allowing insurers to manage risk effectively while still catering to small businesses. This size and revenue threshold helps ensure that the policyholders are within a manageable risk group that the insurer can cover while offering the benefits of a more comprehensive package at a lower cost than commercial insurance policies tailored for larger operations. In terms of the other options, they either propose larger limits or remove restrictions altogether. These alternatives do not align with the typical underwriting guidelines for a BOP, which necessitate maintaining specific parameters to ensure the policies remain relevant and protect the insurer from excessive risk associated with larger or rapidly growing enterprises.