General liability insurance vs. business owner's policy
General liability insurance is included in a business owner's policy (BOP), a bundle designed for small, low-risk businesses. Learn about these two policies, their exclusions, and how they can protect your business income.
What is general liability insurance?
General liability insurance covers common lawsuits that small business owners may face. It kicks in when a third party (anyone who doesn’t work for your business) sues you over:
- Bodily injuries they suffered on your business premises
- Property damage you caused while completing work
- Advertising injuries / personal injuries such as slander, libel, using someone’s image without their permission, or copyright infringement
What does general liability insurance pay for?
When you're sued by a third party, general liability compensates you for legal defense costs, settlements, and judgments up to your policy limit. Even a frivolous lawsuit against your business could be expensive, so a general liability policy is key to protecting your assets.
What is a business owner's policy?
A business owner’s policy is a package policy that bundles general liability coverage with commercial property insurance, often with business interruption coverage as well.
It’s typically less expensive than buying the policies separately. A BOP includes:
- General liability insurance: Covers common business risks, such as customer injuries on your property, or damage to a customer's property.
- Commercial property insurance: Compensates you for insured business assets that are lost or damaged by fire, theft, or windstorms. This coverage is required for most commercial leases.
- Business interruption insurance: Reimburses you for lost income when a covered property event forces you to temporarily halt business operations.
Who qualifies for a business owner's policy?
Though a BOP is a comprehensive and affordable option, it’s not available to all business owners. To qualify for this coverage, you must:
- Own a small business (i.e., your premises are small, and you have a limited number of employees)
- Work in a low-risk industry
- Need no more than 12 months of business interruption coverage
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MALE VOICEOVER: As a small business owner, protecting your business from the unexpected isn't just smart, it's essential. Whether you run a retail store, consulting firm, or cleaning service, you face risks every day.
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A customer could slip and fall, a fire could damage your inventory, or a client might file a lawsuit over your advertising.
That's where business insurance comes in.
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Two of the most common and important types of small business insurance are general liability coverage, and a business owner's policy, also known as a BOP.
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General liability insurance is the foundation of small business protection. It helps cover the cost of third-party claims, or people outside of your business, if they're injured or their property is damaged because of your business activities. It also helps cover advertising injuries, such as libel, slander, or copyright infringement. Think of it as your first line of defense against lawsuits and claims that could otherwise be financially devastating.
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But what if your business owns or rents property? What if you've invested in equipment, furnishings, or inventory? That's where a business owner's policy can offer broader protection.
In other words, it covers not just what might happen to someone else, but what might happen to your own business property, too.
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A BOP combines general liability coverage with commercial property insurance, which protects your physical assets from damage caused by fire, theft, vandalism, and certain natural disasters.
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Some BOPs even include business interruption insurance, which can help cover lost income if a covered event temporarily shuts down your operations.]
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So, who should get general liability insurance? And who needs a BOP?
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General liability coverage is a great choice if you're a freelancer or independent contractor, if you work from home, or don't have any business owned property to protect.
It's also typically required for certain client contracts and state business licenses.
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But if you operate out of a physical location, like a storefront or office, or if you rely on specialized equipment or inventory to keep your business running, then a BOP is probably the better and more cost-effective option.
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That's because bundling property and liability insurance into one policy often costs less than buying each separately.
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Not sure which policy is right for your business? A licensed agent can help you compare coverage options based on your business type, size, and budget.
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Protecting your business doesn't have to be complicated or expensive.
Click the link to get free insurance quotes online with Insureon.
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Insureon helps a wide range of businesses get the coverage they need from top-rated U.S. insurance carriers. Complete our easy online application to get free insurance quotes.
Our expert insurance agents can help you choose the best general liability or business owner's policy that meets the needs of your small business.
You’ll typically be able to get coverage quickly and receive a copy of your insurance certificate on the same day.
How are general liability and BOP insurance different?
There are several differences between a standalone general liability insurance policy and a BOP:
A BOP can reduce your insurance rates. A BOP can help you save money on small business insurance, as you’ll receive multiple types of coverage at a lower rate than buying each policy separately.
BOPs are not available to all business owners. You must meet certain criteria to bundle business liability insurance and property insurance. Only low-risk small businesses can purchase a BOP, while almost any business can purchase general liability insurance.
For example, if you work in construction, you may not be eligible for a business owner's policy because your industry is considered high risk. You could, however, still purchase a general liability policy to protect your construction business from liability exposures, and purchase property insurance separately.
How are general liability and BOP insurance similar?
There's plenty of common ground between what a standalone general liability policy and a business owner's policy cover.
Both policies offer basic liability protection. A general liability policy and a BOP both protect your small business against premises liability, property damage liability, and advertising liability claims.
Both policies can be customized with endorsements. If you need additional coverage, you can add product liability coverage or liquor liability insurance to either your general liability or BOP insurance.
Remember, a business owner’s policy includes general liability coverage, so you only need to purchase one of the two policies.
Is there a coverage gap between a BOP and general liability insurance?
While general liability insurance covers the damage you cause to someone else’s property, it doesn’t cover your own business property or the cost of a business shutdown.
If you or an employee damaged someone else’s business or personal property, it would be covered by your general liability policy.
If any of your business property was damaged or lost due to a fire, vandalism, burglary, or extreme weather, it would not be covered by your general liability policy. General liability also wouldn’t cover your loss of income if you had to temporarily close your business after one of these covered events.
That’s why many small business owners buy a BOP, because it protects their bottom line from so many risks. Imagine the cost to your business if you had to replace your tools, equipment, and inventory, or if you faced a temporary closure after a storm or fire.
A BOP would also meet a commercial landlord’s requirement for commercial property insurance, in order to sign a lease.
Who needs a BOP vs. general liability?
For small business owners, a general liability policy is typically the first insurance policy they buy because it covers common business risks.
Business owners might purchase a BOP instead because:
- They also need property insurance coverage to sign a lease.
- Damage or loss of their business property would present a major financial loss.
- They can’t afford a temporary business shutdown.
A BOP also allows the flexibility for business owners to add coverage endorsements for other helpful policies, such as professional liability insurance and data breach insurance (which are also referred to as errors and omissions insurance (E&O) and cyber insurance, respectively).
However, neither general liability or a business owner's policy can add coverage for workers' compensation insurance or commercial auto insurance. Your business may be required by state law to carry each of these policies.
What’s the insurance cost of general liability vs. a business owner's policy?
For Insureon customers, average premiums are:
- $42 per month for general liability insurance
- $67 per month for commercial property insurance
- $57 per month for a business owner’s policy (BOP)
With a BOP, Insureon customers can save an average of $52 per month on premiums, or about $624 per year, while gaining all the benefits offered by general liability and commercial property coverage.
Get free small business insurance quotes from trusted carriers with Insureon
Complete Insureon’s easy online application today to compare quotes on all types of business insurance policies from top-rated U.S. insurance companies. You can also consult with an insurance agent on the types of insurance your business needs. Once you find the right insurance products for your small business, you can begin coverage in less than 24 hours.
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