Is business liability the same as general liability?
Business liability is another term companies use for general liability, but it could also refer to professional liability insurance. Each type of liability insurance covers different risks, so it’s important to understand how the terms differ.
General liability insurance (GL) covers claims if someone sues your small business for:
- Advertising or personal injuries, including libel, slander, copyright infringement, defamation, or use of their image or likeness without prior permission.
- Bodily injuries sustained at your place of work.
- Property damage you or an employee causes to your client’s property while performing work.
Professional liability insurance covers lawsuit claims for errors, omissions, misrepresentations, or negligence that negatively affect customers. It is also known as errors and omissions (E&O) insurance. For example, if you are a financial advisor and your hot stock tip causes a client to lose a large sum of money, you could be sued for negligence.
Now, let’s dive into the details of a general liability policy vs. a business owner's policy.
| Pros | Cons | |
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| Business owner’s policy (BOP) |
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| General liability (GL) |
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Does a business owner's policy (BOP) include general liability?
Yes. A business owner’s policy, or BOP, combines several commercial insurance policies into one. A BOP includes general liability, commercial property and business interruption insurance.
Commercial property insurance covers damage to company-owned commercial property, buildings, equipment, or inventory. Business interruption insurance can reimburse lost income if a covered loss prevents you from being able to operate your business.
Business owners policy vs. general liability
Coverage and cost are the main differences between a business owner’s policy and general liability insurance.
Both provide basic liability coverage, but a BOP also includes general liability, commercial property and business income coverage. A GL policy only offers coverage if you’re sued for on-premises injuries, advertising or personal injury, or for property damage your small business staff causes to others. Neither policy covers business vehicle accidents or employee injuries; those are covered by commercial auto insurance and workers compensation, respectively.
Though most insurers offer GL coverage for low- and high-risk industries, you may only be eligible for a BOP if your small business is in a low-risk industry. So, your construction or trucking business may not qualify for a BOP, but you can purchase commercial property, general liability and business interruption policies separately.
It’s also worth discussing premium audits by the insurance company – which could affect rates in the future.
Insurers conduct an annual premium audit on GL, commercial package and workers’ compensation policies to ensure you have the right coverage for your business exposure and are paying the correct premium amount. If your carrier determines you need additional coverage because you expanded your warehouse earlier in the year, for example, you could see higher rates in the future. Conversely, if you were to close a location or trim your workforce, the audit could reveal that you’re paying for coverage you don’t need and adjust rates accordingly.
BOPs usually aren’t subject to an audit, though it can vary by company and state.
Despite a BOP offering much broader coverage, it typically doesn’t cost much more than a GL policy. The average cost of a general liability policy is $42 per month, but a BOP only costs $57 per month, according to small business insurance broker Insureon.
Expert Insight"Small business owners who qualify for a BOP may prefer it to a general liability policy because a BOP typically is not subject to a premium audit the way GL policies are."
How do a BOP and general liability insurance work?
General liability insurance covers third-party injuries and property damage, as well as copyright infringement, liability and slander claims. It can pay for expenses you incur from a lawsuit, including attorney fees, court costs, judgments and settlements. A GL policy can also help you qualify for a business contract or commercial lease.
A BOP covers all that, and more. For instance, if somebody steals or vandalizes your commercial building, office equipment or inventory, a BOP can cover the cost of repairing or replacing your property. It can also reimburse you for lost income so you can continue to pay your rent, utilities and employees' wages if your business cannot operate due to a covered claim.
Do you need general liability insurance and a business owner’s policy?
You only need one policy, not both. A business owner’s policy includes general liability coverage, so if you qualify for a BOP and need property and business interruption coverage, it makes sense to get a BOP instead of a GL policy.
But if your business isn’t eligible for a BOP or you don’t need the extra coverage, you probably only need a general liability policy. Working with an experienced commercial insurance agent or broker is best to help you shop for insurance based on your risk, policy and coverage needs.
FAQs
What is general liability insurance and what does it cover?
General liability insurance is a type of small business insurance that covers claims for advertising or personal injury, property damage and bodily injury to nonemployees.
What is BOP insurance and what does it cover?
BOP insurance, or a business owner’s policy, is a form of small business insurance that combines general liability, commercial property and business income insurance. Each type of coverage can provide financial protection for your small business if you cause harm to a client or an event damages your business. General liability covers claims for advertising injury, bodily injury and property damage to others. Commercial property covers claims for covered events that damage your rented, owned, or leased buildings, office space, business property and inventory. Business interruption coverage can compensate for lost income when your business cannot run because of damage from a covered loss.
How often should I review my general liability or BOP coverage?
You should review your general liability or BOP coverage at each policy renewal, which usually happens once per year. You should also review your coverages, limitations and exclusions when you’re bidding on a new contract or signing a new client or lease to ensure that your policy will continue to meet your needs.
In addition, if you have BOP coverage, you should review your policy if you’re buying, renting, or leasing new inventory, equipment, or property and when hiring new employees to ensure you have enough property and business income coverage.
