Business Owner’s Policy vs. General Liability: Which Fits Your Needs?

As a small business owner, you know you need insurance, but what type of policy do you need? Most businesses start with a general liability policy but often don’t realize that they can get more bang for their buck with a business owner’s policy (BOP). Here’s what you need to know about the differences and similarities between a BOP and a general liability insurance policy. 

Why is Business Insurance Important?

Business insurance, also known as commercial insurance, is important because it protects a business from the financial losses associated with claims. Some insurance covers third-party losses, while other types of policies cover first-party losses (the losses of the business itself). Without insurance, the business would have to pay for the losses out of pocket, which can be expensive and put the business in financial constraints. Let’s look at the differences between a general liability policy and BOP. 

Understanding the Business Owner’s Policy (BOP)

Let’s take a look at a business owner’s policy (BOP).

What is a Business Owner’s Policy?

A BOP is suitable for small businesses that are growing and need comprehensive coverage for general liability and commercial property insurance while being on a budget. The BOP is a combination policy that offers two to three types of insurance policies within it. The policies it covers are: 

• General liability
• Commercial property insurance
• Business interruption insurance

Most commercial insurance carriers offer BOP for small businesses with revenues capped at $5 million dollars annually. There are a few insurance carriers who offer the BOP with higher revenue numbers. Getting a BOP is often cheaper than getting all three policies individually. 

Advantages of BOP

The advantages of the BOP are convenience and cost savings. Having one policy helps ensure that there are no gaps in coverage for the small business. By going through only one underwriting process, the insurance carrier can offer the policy for less. 

Understanding General Liability Insurance

Let’s take a look at a general liability insurance policy. 

What is General Liability Insurance?

General liability insurance covers a business for third-party losses where a client or bystander is hurt or experiences property damage as a result of the business operations of a company. The policy will pay medical expenses or pay to repair or replace the damaged property. It will also cover any legal fees associated with the loss should a lawsuit be filed. 

General liability is a necessary policy for all businesses because of the risk of losses. A loss can happen to anyone at any time. If you have a BOP, you don’t need to also get general liability because the BOP has it in it. 

Business Owner’s Policy vs. General Liability

There are some key differences between the two policies that business owners should be aware of. 

 Key Differences

1. Coverage scope: The coverage scope is broader on a BOP because it has more policies within the one package. It ensures there are fewer gaps in insurance for the small business. 
2. Cost considerations: The BOP is often the same price if not less than buying general liability and commercial property insurance separately. The underwriting of one policy makes the process more efficient and cost-effective. 
3. Customization options: A BOP has the ability to offer more customizations because it has more policies intertwined within it. 

Situational Analysis

A BOP is preferable when a small business is looking to get the most coverage for the least amount of premium and qualifies for the BOP revenue cap of $5 million. Once the cap is reached, the business will need to go with a general liability policy and get commercial property insurance and business interruption insurance separately.

How to Choose Between BOP and General Liability

A good insurance agent can help you determine whether you need a BOP or a general liability insurance policy as part of their services. They will help you assess your needs and look at the risks your company has. Few companies exist that won’t benefit from the BOP’s commercial property insurance coverage, and they should look to get a combined policy if they qualify. 

• Benefits of Having Both Policies
• Comprehensive Coverage
• Cost-Effectiveness
• Protection Against Physical and Financial Loss

Choosing Business Owner’s Policy vs. General Liability Insurance for Your Business

Take the time to read through our best business insurance providers to get a sense of which carrier is the right one for you. See if you qualify for a BOP and get the right coverage for your company.