General liability and business owner’s policy (BOP) are insurance policies that offer protection by helping with the costs associated with a claim, and both policies can be customized with endorsements. The difference between a business owner’s policy and general liability is general liability covers the costs of third-party liability claims, while the BOP carries the same coverage as general liability—with additional first-party coverage for your business property.
What It Is | Third-party coverage for claims of bodily injury, property damage, or personal injury as a result of your business operations | A combination of two policies: commercial property and general liability |
Best For | Contractors, service professionals, handypersons | Small businesses that have property they want to insure and need liability insurance |
Costs |
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Covered Risks |
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Eligibility | Any size business | Small and medium-sized businesses (SMBs) |
Industry | Most industries | Low-risk industries |
What Is General Liability Insurance?
General liability insurance protects your business by handling the financial obligations that may arise when your business’ negligence caused an injury or damaged property. It may also include claims for advertising injuries, such as libel and slander.
Typically, general liability covers a business’ legal defense and any settlements or judgments awarded to an injured party. The claims are handled within the limits of the policy, which usually has a per occurrence (claim) limit and an aggregate limit (the total amount the policy will pay during a policy period).
General liability is the most common policy for any small business. There‘s almost no situation or business that doesn‘t qualify for it. However, high-risk industries may find that not every carrier will provide coverage, and the premiums may be much higher.
Say your business is painting the exterior of a home and a passerby trips on the equipment that is improperly blocking the sidewalk. If they‘re injured and the sidewalk gets stained with paint, then a general liability claim could be filed for the third-party’s injuries and the cost of cleaning the sidewalk.
Usually, when a vendor or other party is requesting a certificate of insurance (COI), they want to make sure you‘re carrying some form of general liability insurance.
What Is a BOP?
As a combination of general liability and commercial property, a BOP contains the same liability coverage available in a general liability policy. It also has commercial property insurance, which is first-party coverage, meaning it contains coverage for company property and assets owned by and used for the business.
Most BOPs also have business interruption, sometimes called business lost income, as an added coverage. This helps your business by paying for lost income and ongoing expenses when a covered event forces you to pause operations, and there‘s usually either a monetary or time limit on this coverage.
Business interruption coverage is applicable only for covered events. Most insurers had a communicable diseases exclusion already in place in their policies, and so during the COVID-19 pandemic, many businesses had business income claims denied when they were forced to shut down.
While BOP is a popular choice for affordability and the simplicity of having one policy for your liability and property coverage, not every business qualifies. Each carrier has different rules but BOPs are reserved for SMBs in low-risk industries with fewer than 100 employees. Mom-and-pop shops, restaurants, and retail stores are all ideal candidates for a BOP.
Typically, if you suffer a named peril loss—such as fire, theft, or wind damage to your property—you can file a claim on the BOP for help fixing or replacing the damage and business income, if applicable. If a chair breaks while a customer is sitting on it in a restaurant and they‘re subsequently injured, a BOP would help with the bodily injury claim.
General Liability vs Business Owner’s Policy: Endorsements
Providers can offer endorsements into the hundreds. Typically, you‘ll see more endorsements available for a BOP than general liability because a BOP is geared toward protecting your business and customers, while general liability is more one-sided. For instance, equipment breakdown isn‘t going to be an endorsement on a liability policy because liability is only for third-party losses.
Depending on your business needs, a provider may offer additional coverage components or endorsements that can be added to either general liability or BOP.
- Hired and nonowned auto insurance cover legal expenses that arise when you or your employees have an accident with a rental, leased, or employee vehicle.
- Liquor liability insurance covers legal fees and medical costs if alcohol is sold to an intoxicated person who causes harm to others or damages property.
- Cyber liability insurance covers costs associated with a data breach or cyberattack.
- Employee dishonesty covers financial loss due to employee theft and other illegal activities.
- Professional liability insurance covers legal fees when clients claim a financial loss due to your negligence or mistakes.
These endorsements are available only for a BOP:
- Spoilage covers the replacement of spoiled perishable inventory after a storage malfunction or power outage.
- Equipment breakdown covers equipment damaged by an internal force, like a power surge or mechanical failure.
- Inland marine insurance covers business property in transit or not at a listed location.
General liability and BOP are both highly customizable. When looking for insurance, make sure to explore all available options for your business.
General Liability vs Business Owner’s Policy: Costs
When it comes to insurance costs, general liability will usually cost less than a BOP because it‘s only one policy and that same policy is, in turn, one part of a BOP. The BOP, however, is usually more affordable than purchasing commercial property and general liability separately. When insurers combine those two policies into a BOP, it usually results in some form of savings.
This difference in coverage is reflected in the potential premium you would pay. We received multiple quotes for two small businesses: a restaurant and a small boutique. Both businesses had four employees and yearly revenue of $190,000.
Liability Limit | Property Limit | Estimated Annual Premium | |
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General Liability for Small Restaurant | $1 million per occurrence and $2 million aggregate | N/A | $2,000 to $3,600 |
BOP for a Small Restaurant | $1 million per occurrence and $2 million aggregate | $1 million building coverage, $50,000 contents and $500 deductible | $3,856 to $9,223.08 |
General Liability for a Small Retail Store | $1 million per occurrence and $2 million aggregate | N/A | $1,160 to $2,660 |
BOP for a Small Retail Store | $1 million per occurrence and $2 million aggregate | $1 million building coverage, $50,000 contents and $500 deductible | $1,278 to $9,516 |
There‘s some overlap when providers assess the potential premium for general liability or BOP. These are:
- Years of experience in the industry
- Claims history
- Number of employees
- Potential revenue
- Industry
Because a BOP contains coverage for property, which often includes an entire building, the provider will ask a few more questions about
- Potential total value of contents
- Type of equipment
- Square footage of business
- Square footage of building
- Age of building
- Any updates done to the building and when
- Construction materials for the building
Because BOPs bundle policies, insurance carriers can offer them at a discounted rate—costing less than what you would spend on each policy. Both policies also can be customized with endorsements to meet your business needs.
Frequently Asked Questions (FAQs)
Both general liability and BOPs are customizable with most carriers. Ask an agent about endorsements that may benefit your business, but some endorsements to consider are cyber liability and professional liability insurance. Keep in mind, adding coverage will likely increase your premium.
While you aren‘t legally required to carry general liability or BOP, it may still be an industry requirement. Many professional services with certification or license requirements will require proof of insurance or a surety bond while vendors or property owners may require liability when renting a space. Given the common risks that both policies cover, it makes good financial sense to be insured.
Homeowner‘s insurance usually has a limited amount of coverage for business property. Most providers, however, offer an endorsement for a homeowner’s policy called a home-business insurance endorsement—but the limits are low and liability may not be covered. There‘s also a form of the BOP designed for in-home businesses that, like a traditional BOP, covers general liability and property coverage.
Bottom Line
General liability protects your business by handling claims for third-party bodily injury, property damage, and advertising injury. Meanwhile, a BOP is more expansive, providing coverage for the same things as general liability and first-party coverage for your building and physical assets. BOPs usually include business interruption coverage.
Protecting your small business with a tailored policy or BOP is a simple process when you go with The Hartford. The established provider can customize a policy for your business in just minutes.
