General Liability Insurance vs. Business Owner's Policy | Insureon (2024)

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

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.

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

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.

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 endorsem*nts. 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.

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.

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 endorsem*nts for other helpful policies, such as professional liability insurance and data breach insurance (which are also referred to as 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.