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General liability insurance vs. business owner's policy

Commercial general liability insurance and a business owner’s policy are two types of business liability insurance that cover similar risks. Learn about what each policy covers, 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 defense costs, settlements or 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 (BOP) is a package policy that bundles a general liability policy with commercial property insurance and business interruption coverage. It’s typically less expensive than buying this additional coverage 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
Get quotes for general liability insurance and a business owner's policy

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.

How are general liability and BOP insurance different?

There are also 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. A business owner must meet certain criteria to be able to bundle insurance policies. 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.

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 inventories, or if you faced a temporary closing of your business after a mishap.

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 BOP?

A small business owner calculating their small business insurance payments

For Insureon customers, their average premiums are:

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.

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Complete Insureon’s easy online application today to compare insurance 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.

Updated: September 13, 2023
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