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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?

Commercial 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

Protect your small business with a BOP

View video transcript.

[video: an animated header displays the Insureon logo. Underneath it, a subheading displays the text: "What is a business owner's policy (BOP)?"]

MALE VOICEOVER: One of the most common commercial insurance policies, a business owner's policy or BOP is not only customizable to your unique business needs, it can often be more affordable than buying each coverage separately.

[video: an illustrated header displays the text: "A BOP is:"]

[video: Under above header, three bullet points display the text: "Affordable"; "Customizable"; "Great for small businesses"]

A BOP typically bundles general liability and commercial property insurance together, but you can also add endorsements to meet your business's coverage needs. Let's take a look at why a BOP is a smart choice for small business owners.

[video: an illustrated header displays the text: "A business owner's policy bundles:"]

[video: Under above header, two bullet points display the text: "General liability insurance" and "Commercial property insurance"]

General liability insurance protects your business from third-party lawsuits over bodily injuries and property damage. Should a customer slip and fall in your store and sustain an injury, you are covered.

[video: an illustrated header displays the text: "General liability protects against:"]

[video: Under above header, three bullet points display the text: "Customer or client injuries"; "Third-party property damage"; "Advertising & personal injuries"]

Commercial property insurance compensates your business if your assets are lost or damaged by incidents, such as fire and theft.

[video: an illustrated header displays the text: "Commercial property covers:"]

[video: Under above header, three bullet points display the text: "Business-owned property"; "Supplies & equipment"; "Inventory"]

These two policies are often required by landlords when signing a commercial lease and are usually the first types of insurance that small business owners will purchase. By getting both policies in a BOP, you get the coverage you need at a lower cost than buying each of them separately.

A business owner's policy can also be tailored to meet your specific insurance needs, from business interruption insurance to data breach coverage to liquor liability insurance.

[video: an illustrated header displays the text: "A BOP can include endorsements for:"]

[video: Under above header, four bullet points display the text: "Business interruption"; "Contractor's tools & equipment"; "Data breaches"; "And more..."]

To qualify for BOP savings, businesses typically must operate in a low-risk industry, have fewer than 100 employees, make less than $1 million in annual revenue, and maintain a small commercial space.

[video: an illustrated header displays the text: "To qualify for a BOP, you must have:"]

[video: Under above header, four bullet points display the text: "A lower-risk industry"; "Less than $1M in annual revenue"; "A small commercial space"; "Fewer than 100 employees"]

While it's not often required by law, a business owner's policy is a wise choice for small businesses that work with the public and own valuable business property.

Get free business owner's policy quotes with Insureon today.

[video: an illustrated white header displays the text: "Insureon is your #1 agency for small business insurance"]

Click the link to get started.

[video: an animated header displays the Insureon logo]

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.

Get quotes for general liability insurance and a business owner's policy

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?

A small business owner calculating their small business insurance payments

For Insureon customers, 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.

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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Updated: February 23, 2024

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