General Liability Insurance vs Business Owner’s Policy

General liability insurance covers your business for a few key risks, including accidents with customers and employees. Business owners policies cover additional risk factors like fraud or product recalls.

The “business owners policy vs general liability” is a debate that has been going on for years. Many people believe that the business owner’s policy is better than general liability insurance, while others argue that general liability insurance is better.

A business owner’s policy (BOP) and general liability insurance both cover the expenses of third-party claims for bodily injuries, property damage, and advertising harm. A BOP, on the other hand, provides commercial property insurance to cover your company’s tangible assets. BOPs are a wonderful alternative for small companies wishing to save money by bundling their insurance.

Work with The Hartford to safeguard your small company with a tailored BOP or general liability policy. Its small business professionals can assist you in determining the best coverage for your need. Obtaining a quotation online is quick and simple, taking just approximately 10 minutes to complete.

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Comparison of General Liability vs. Business Owner’s Policy

When it comes to general liability insurance vs. a company owner’s policy, there are certain major commonalities to be aware of. General liability insurance offers basic liability coverage for personal injury, property damage, and reputational damage claims. The injured party’s medical and repair expenses, as well as your legal fees if they sue, are usually covered by general liability plans.

General liability and commercial property insurance are combined in a company owner’s policy. Commercial property insurance pays out if your business’s property or assets are destroyed or lost due to fire, theft, or windstorms. Business interruption coverage is often included in BOPs to cover continuing expenditures and lost revenue if a covered event forces you to temporarily cease operations. A BOP provides the same level of protection as a standalone general liability insurance, as well as additional benefits. You don’t need a separate general liability coverage if you buy a BOP.

The following is a diagram showing the coverage given by both policies:

Because BOPs combine policies, insurance companies may provide them at a lower cost than solo policies. Both plans may be tailored with endorsements to fit the specific coverage requirements of your company.

What is General Liability Insurance and How Does It Work?

General liability insurance protects your small company against third-party liability claims, such as personal injury, property damage, and medical costs, that may happen as a result of your business activities. Claims for advertising harms, such as copyright infringement, libel, and slander, may also be included. The legal defense of a company, as well as any settlements or judgements given to an aggrieved party, are often covered by general liability insurance.

In most cases, your general liability insurance will cover you if a third party (i.e., someone who isn’t employed by your firm) gets hurt in some manner while doing business with you. Damage to your commercial property or assets, allegations of carelessness, harm to customer property in your custody, or damage purposely inflicted by your organization are not covered by general liability insurance.

Obtaining a general liability policy and a certificate of insurance as evidence of coverage implies that your company is responsible, established, and trustworthy. Customers are more inclined to conduct business with you if they are aware that you have liability insurance in place to safeguard them financially.

How Does a Business Owner’s Insurance Work?

The same liability coverage as a general liability insurance is included in a company owner’s policy, including protection against third-party injury and property damage, reputational damages, and product-related claims. It also comes with the added benefit of commercial property insurance, which covers firm property and assets owned by and utilized by your organization.

Additionally, when a covered incident compels you to cease operations, BOPs provide business interruption coverage for lost revenue and continuing expenditures. Insurers often only cover these charges for a period of 12 months, but it may assist you in covering missed income, employee compensation, rent, utilities, and relocation fees.

Depending on the carrier, BOPs are built primarily for small or medium-sized organizations. To be eligible for a BOP, your company must satisfy certain standards. These are generally determined by revenue, industry, and personnel count.

Eligibility for a Business Owner’s Policy

In one package, a company owner’s insurance covers both property and liability risks. This bundle is usually supplied at a lower price than the sum of the individual insurance. Although the specific coverage covered in a BOP varies by carrier, most plans need companies to fulfill certain qualifying conditions in order to be eligible.

Eligibility for a Business Owner’s Policy Criteria

When a BOP is available, Brandon Gehring, Agent, Insurance Werks Services, normally advises a company to use it.

“Unfortunately, many types of businesses do not have BOPs. Contractors, for example, are nearly often insured separately under a general liability insurance. BOPs are available to most ‘Main Street’ brick-and-mortar companies (e.g., florists, dry cleaners, and offices).”

When Should You Take Out General Liability Insurance?

Commercial general liability insurance is required by most company owners since it covers the most common dangers they encounter. In reality, it’s called general liability insurance since it covers all of a company’s responsibilities. Though it isn’t needed by law, you may discover that clients and landlords insist on it.

If your company is in the following situations, general liability insurance may be required:

• Consider the following scenario: a client stumbles and falls at your establishment. A general liability coverage may assist pay for their medical care as well as your legal defense if they decide to sue your company for the accident.
• You or one of your staff pays a visit to a client: When you visit customers or work areas that are not in your principal company location, general liability follows you. General liability, for example, will protect you if you damage a client’s property at their house.
• You want to get more customers: Because they don’t want to be held accountable for your company’s conduct, clients typically regard general liability coverage to be a requirement for working with them.
• Your landlord expects you to have it in order to sign a lease: Are you looking to rent or lease a location for your company? Many landlords demand general liability insurance to protect themselves from being held accountable for mishaps caused by your company.

The quantity of general liability insurance a company needs is determined by its risk exposure and contractual obligations. In general, the higher the risk in your company or sector, the more insurance you’ll require. Depending on your insurance, you may have additional coverage alternatives.

When Should a Business Owner’s Policy Be Used?

To guarantee they have the coverage they need, business owners often acquire a BOP rather than separate general liability and property policies. Even if your company just has a few pieces of property, you should make sure it’s well-protected. It also saves money by taking advantage of a BOP’s cheap package.

A business owner’s policy includes general liability coverage as well as commercial property and business interruption coverage. If you qualify, buying a BOP is typically less expensive than buying each coverage individually. A BOP is a great insurance plan for small, low-risk enterprises that provides additional protection at a lower cost.

When Should You Get a Home Business Endorsement for Your Homeowners Policy?

If you run your company out of your home, you may not need the comprehensive coverage of a business owner’s insurance. Most standard homeowners insurance policies, on the other hand, omit coverage for business liability and provide very limited coverage for commercial property. If you want to add a business endorsement to your homes insurance, go to your insurance agent.

You may guarantee that your company is protected by adding liability or property coverage as an endorsement to your homes policy. A home business endorsement may help you enhance your business property coverage limits while also addressing some of your company liability risks. Many plans pay up to $2,500 on-premises or $1,500 off-premises for damage to commercial property owned or utilized by the homeowner.

Covered Risks: General Liability Insurance vs. Business Owner’s Policy

When it comes to small company insurance, general liability insurance and business owner’s policies cover many of the same risks. This is because one of the insurance included in a company owner’s policy is general liability. BOPs, on the other hand, cover commercial property.

Insurance for General Liability Risks that are covered

General liability insurance is a critical company coverage since it protects against risks that are inherent in most businesses, such as damage to third parties such as customers and other visitors. This is why the majority of company owners get general liability coverage.

There are three aspects to standard general liability coverage. These are the following:

• Doctor or repair expenses for someone who is hurt on your premises or as a result of your product or service and is not employed by your company.
• Losses from libel, slander, copyright infringement, and other forms of advertising harm
• Immediate medical payments: No-fault coverage for unexpected medical expenses, such as an ambulance ride or a trip to the emergency room.

Risks Covered by a Business Owner’s Policy

BOPs, like general liability insurance, protect claims that your company caused property damage or bodily injury to a third party. A business owner’s policy, on the other hand, comes with commercial property insurance to protect your company’s assets, as well as business interruption coverage.

Small companies are protected by a company owner’s insurance in the following ways:

• Third-party claims for physical injury, property damage, and reputational loss are referred to as general liability.
• Commercial property refers to damage to property held by a business, such as buildings and their contents.
• If a covered occurrence compels you to temporarily halt your activities, business interruption coverage pays for lost earnings and continuing expenditures.

The Costs of General Liability Insurance vs. a Business Owner’s Policy

The cost of general liability insurance or a company owner’s policy varies depending on the size, kind, and industry of your small business, as well as coverage limitations. Insurance companies charge differently depending on the sector, but other variables also play a role.

Costs of General Liability Insurance

The average cost of general liability insurance for a small company is between $400 and $600 per year. The cost of your premium is heavily influenced by the industry. Retail stores and restaurants, for example, have a high volume of foot traffic and so pay more for general liability insurance. Business consultants, on the other hand, often pay less since they are less likely to be sued for third-party property damage or injury.

Costs of a Business Owner’s Policy

A company owner’s insurance normally costs between $350 and $3,000 per year, depending on your sector and risks. While a BOP is often more costly than a solo general liability insurance, you get more coverage and protection—liability, commercial property, and business interruption—all in one package. If your company qualifies, BOPs are usually less expensive than standalone commercial insurance plans.

Eligibility for General Liability Insurance vs. a Business Owner’s Policy

Many risks are covered by general liability insurance and business owner’s policies for small firms, but not every company qualifies for coverage. BOPs are often reserved by insurers for firms with modest revenue, small locations, and few employees, since this reduces their claim risk.

Insurance for General Liability Eligibility

General liability insurance is a must-have for small companies, and it is available to almost all of them. There is essentially no circumstance or company that does not qualify for general liability insurance, while high-risk businesses may discover that not all carriers are willing to provide coverage and that rates will be higher.

Eligibility for a Business Owner’s Policy

BOPs are a popular option for company owners looking for low-cost insurance, but not everyone is eligible. BOPs are normally designated for small to mid-sized firms in low-risk sectors, although each carrier has its own set of restrictions. Additionally, enterprises must have less than 100 workers, a revenue of less than $1 million, and a modest commercial location.

Industries: General Liability Insurance vs. Business Owner’s Policy

Insurers consider industry when determining whether your company qualifies for general liability insurance or a business owner’s policy. The industry in which your company operates typically determines your risks.

Industries that deal with general liability insurance

Because general liability insurance is so widely used, it is applicable to a wide range of sectors. Because there is less foot traffic and a smaller chance of property damage in a low-risk field like accountancy or consulting, your general liability rates may be cheaper. Low-risk enterprises are those that operate from home or have a modest office.

If you operate in a high-risk business like cleaning or construction, your prices will skyrocket since you’ll be dealing with a lot of foot traffic and visiting other people’s homes, as well as unsafe day-to-day operations.

Industry Policies for Business Owners

Only enterprises in low-risk sectors are often eligible for a BOP. The insurance limitations on a company owner’s coverage are usually capped, and it’s usually reserved for small enterprises. The greatest amount a carrier will pay on a claim is known as the limit. An office-based company, such as an accountancy firm, is, for example, deemed low risk. Construction, on the other hand, is often seen as a high-risk industry due to occupational risks and the usage of heavy equipment.

Example of General Liability Insurance

Assume you operate a painting company and travel often to meet with customers. If you shatter a mirror while painting at a client’s house, they may file a lawsuit against you. Your general liability coverage may cover the cost of repairing or replacing the shattered mirror, as well as any other property damage.

One thing to keep in mind is that general liability insurance does not cover any property owned by your company. So, if your helper breaks an extended ladder you’re using to paint high exterior walls or ceilings, the expense of repairing or replacing your equipment would be covered exclusively by commercial property insurance or the property coverage contained in a BOP.

Example of a Business Owner’s Policy

Assume you’re the owner of a hair business. A tree falls through the roof of the salon during a storm, essentially shutting down all of your activities. A business interruption policy (BOP) covers your expenditures while the salon is closed for repairs. That implies you’ll be able to cover your rent, personnel salaries, and income losses.

A BOP may even assist cover the expenses of relocating and setting up business in a temporary location. Third-party physical injury or property damage is also covered by a company owner’s insurance. In addition, if any of the salon’s belongings are destroyed as a result of the roof fall, commercial property insurance included in your BOP may assist pay for their repair or replacement.

Example of a Homeowners Policy with a Home Business Insurance Endorsement

Assume you own a home-based company that sells hand-knit items online. This means you get frequent post office deliveries and pickups, resulting in a lot of foot activity around your house. Your homeowners coverage may not offer liability protection in these scenarios since these deliveries and pickups are business-related.

Your firm might be held accountable if a delivery worker stumbles outside your house. You may protect yourself against these sorts of accidents by adding a home business insurance endorsement to your current homeowners policy. If you’re unsure, contact your insurance carrier to find out what kind of home business coverage you need.

Endorsements for General Liability & Business Owner’s Policies

Your insurance provider may offer extra coverage components to add to your general liability or BOP policy, depending on your business’s condition. These endorsements often have limited coverage levels, but they provide additional protection at a lower cost.

You may be able to add the following endorsements to your policy:

• Hired and non-owned car insurance covers legal costs if you or an employee is involved in an accident while driving a rented, leased, or employee vehicle.
• Liquor liability insurance pays for legal and medical expenses if alcohol is sold to an inebriated individual who harms others or causes property damage.
• Cyber liability insurance protects you from the financial consequences of a data breach or cyberattack.
• Business property, freight, or tools in transit are covered by inland marine insurance.
• Professional liability insurance pays for legal bills if a client sues you for a financial loss caused by your carelessness or blunders (also called errors and omissions insurance).
• Spoilage: Covers the cost of replacing spoilt perishable goods caused by a storage failure or a power outage.
• Employee dishonesty: Provides coverage for financial losses incurred as a result of employee theft and other criminal activity.

Depending on your demands, both general liability insurance and a company owner’s policy are very customizable. To ensure you have enough coverage and to learn about possible reductions, speak with an expert insurance agent acquainted with your sector.

Frequently Asked Questions about General Liability Insurance vs. Business Owner’s Policy (FAQs)

Company owners may be perplexed when deciding between general liability insurance and a business owner’s policy since both are popular solutions that handle their most prevalent risks. Business owners often have concerns about how they function or whether it’s a suitable match for their company since they share comparable characteristics. Here are some of the most commonly asked questions concerning general liability vs. business interruption policies.

Is it possible to tailor a general liability or company owner’s policy?

Most insurance companies allow you to customize your general liability and BOPs. Inquire with your agent about endorsements that may be beneficial to your company, such as cyber liability insurance for data breach protection or inland marine insurance to cover your company’s property while it is in transit. Keep in mind that these features often have minimal coverage limitations.

Is general liability or a business owners policy necessary by law for my company?

You are not obliged by law to get general liability or business owner’s insurance. Liability insurance, on the other hand, protects against a variety of frequent hazards that company owners encounter, thus it makes financial sense to get one. In order to apply for a professional license, sign a client contract, or sign a lease, you may also require liability insurance.

A business owner’s coverage is available to anybody who owns a company.

A company must be in a low-risk field (e.g., accountancy or consulting), have few workers, operate in a small location, and have modest yearly sales to qualify for a BOP. Because insurers have different requirements, you should contact with an agent to see whether your company qualifies for a cheap BOP package.

Conclusion

Company insurance is a smart investment for small business owners who are just starting out to safeguard their financial assets. Third-party physical injury, property damage, and advertising harm are all covered by general liability and BOPs. BOPs provide with the additional benefit of commercial property insurance and business interruption coverage in one handy bundle at a reduced price.

With a personalized general liability coverage or BOP from The Hartford, protecting your small company is straightforward. Small business professionals at the insurer can tailor a coverage to your specific needs.

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Business Owner’s Policy is a type of insurance policy that protects the business owner from liability. It provides coverage for bodily injury and property damage to others, as well as general liabilities. A General Liability Insurance covers all types of liability, including personal injury, property damage, and advertising injury. Reference: business insurance.

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