General liability insurance vs. business owner's policies: what's the difference?
Much of running a successful venture hinges on managing risk – either taking it on or mitigating it. It is only natural to wonder how to keep your business free from unnecessary risk.
Unfortunately, some business risks are impossible to predict or prepare for. The best thing you can do to account for these risks is make sure you're covered by a reliable insurance policy.
In this post, we’ll be looking at the two most common types of commercial insurance: general liability insurance and business owner’s policies, to help you make the best decision for your business.
What is general liability insurance?
General liability insurance (GLI) protects businesses against torts (claims) that come from third parties such as customers and suppliers. It is designed to protect you against various accidents or mistakes. Without this coverage, you would have to pay for these expenses out-of-pocket.
GLI covers a range of possible claims such as:
- Bodily injury - Someone being injured at your premises or due to your business operations.
- Property damage - A customer’s property being damaged by an employee or someone else you're responsible for.
- Reputational damage - Slander, libel, malicious prosecution, and more.
Note that general liability insurance does not cover any injuries suffered by those on your business’s payroll. Those claims are covered under a separate type of insurance known as worker’s compensation.
Finally, many financial institutions, potential business partners, investors, landlords, and licensing boards may require your business to have general liability insurance before engaging with you. Remember that your business risks can affect these partners just like they'll have an impact on your own operations.
It’s important to have not just for peace of mind, but also to open the door to bigger business opportunities.
How much does general liability insurance cost?
The price of general liability insurance depends on various factors including your revenue, risk level, industry, and more.
Need a general liability insurance quote? Check out our insurance marketplace to compare options and find a plan that makes sense for your business.
What is a business owner’s policy (BOP)?
In contrast, a business owner’s policy (BOP) is much broader than general liability insurance. It includes two additional kinds of coverage in one package: commercial property insurance and business interruption insurance.
Commercial property insurance covers any damage that occurs to your property or its contents. Both leased and owned property are covered, with some stipulations depending on your policy.
Business interruption insurance covers lost income and extra expenses due to unforeseen circumstances, such as a flood, fire, or other catastrophe. This type of coverage can also be called business income insurance, as it protects the income of your company. It is important to note that this coverage will only protect your income from specific circumstances outlined in your policy. Simply because you lost income due to an unfortunate circumstance does not automatically mean you get reimbursed.
How much does BOP cost?
While rates vary, you should expect a business owner's policy to cost more than general liability insurance since it includes additional types of coverage. Click here to get a quote today.
How are general liability insurance and BOP different?
Though both types of coverage apply to similar issues, there is one other major difference to consider: eligibility. General liability insurance is typically available to all businesses regardless of criteria. Business owners policies are not.
In order to qualify for a BOP, certain conditions need to be met such as:
- Owning a small business (i.e. small premises and a limited number of employees)
- Working in a low-risk industry
- Not needing business income insurance for more than 12 consecutive months
In addition, insurance companies might also look at the type of property you own, type of business, amount of revenue, stability, security systems, and other factors. Needless to say, BOP is a bit more complex than at first glance. Though its benefits are credible, the application process is much more stringent.
How are general liability insurance and BOP similar?
On the other hand, these two types of insurance are also quite similar. Both cover damages based on bodily harm, damage to property, damage to your business’s reputation, and advertising damages. Both policies also allow for upgrades, or the addition of other policies to strengthen your risk mitigation strategies. These could be policies like worker’s compensation or product liability insurance.
How do I decide what insurance is best for my business?
The most critical question is also the most pragmatic: what’s best for me? While we can't provide personalized recommendations, it's important to consider your unique circumstances.
Think about what kind of risks your business is likely to face. If it is unlikely that someone could be injured while using equipment, then maybe selecting a policy that has lower coverage amounts for bodily injury damages may make sense.
With that in mind, business owner's policies may include more coverage than is necessary for some companies.
For instance, if you run a fully remote business from your laptop as a digital nomad, you don't need commercial property insurance. It is important to only pay for insurance that covers real risks to your business.
However, you also need to consider the kinds of work you plan to do in the near future. Rather than going through multiple policies in a short time frame, try to choose a policy that reflects the trajectory of your business.
To conclude, here is a short recap of the two major types of insurance:
General liability insurance covers your business against bodily harm, property damage, advertising damages, and some reputational damages.
Business owner’s policies include all of the perks of GLI, but with the added coverage of property insurance, and business income insurance in the event of an issue that affects your bottom line.
Remember, the best insurance isn’t based solely on cost, it is based on how well it suits your business – now and in the future. Click here to find the perfect insurance policy for your company.
Content and associated insurance products are provided by Brokery, LLC (“Brokery”), a licensed seller of insurance. The above does not in any way constitute an endorsement or referral of Brokery’s products or services. Further, the above content does not in any way alter or amend the terms, conditions, or exclusions of any insurance policy.