Most of us know there are certain types of insurance we really shouldn’t go without. Health insurance, auto insurance and homeowner’s or renter’s insurance are three examples of must-have insurance coverage for many.  

Whether you just started a business or you’ve been operating a while, you may wonder whether you really need business insurance. That may be especially true if you run your business from home, don’t have employees, or don’t sell any physical products. 

Don’t make the mistake of assuming personal insurance is enough. 

Personal and business insurance are designed to protect against different types of risks and losses. Personal insurance, like health, home or auto insurance, covers individuals and their personal assets. It protects against personal risks, such as accidents, theft, or damage to one’s body, home, property or car.

Business insurance, on the other hand, is all about safeguarding a business and its assets. This includes protection against risks like liability claims, property damage, and business interruption. 

The key difference is what the insurance policy protects. 

Personal insurance protects your personal assets, while business insurance protects your business assets. Business insurance often includes more complex and specific coverages, tailored to the unique risks that businesses face.

What Is the Difference Between Business Owners Policy and General Liability?

A Business Owners Policy (BOP) and general liability insurance policy are two important types of business insurance, but they cover different things.

General Liability insurance is often considered the first layer of protection for a business, and it’s probably what comes to mind when you think about business insurance. 

It typically covers legal fees, medical expenses, and damages if your business is responsible for causing harm to a third party, such as a customer getting injured at your place of business or if your employee damages someone else’s property while working.

A Business Owners Policy, on the other hand, is a more comprehensive package. It includes General Liability but also adds other coverages that a small business typically needs. 

This often includes property insurance, which protects your business’s physical assets (like your office or equipment) from fire, theft, or other damages. Some BOPs also include business interruption insurance, which helps cover the loss of income if your business has to temporarily close.

General liability insurance is often the starting point for many businesses, and offers basic protection against third-party claims. BOP offers broader coverage, including general liability, property insurance, and possibly business interruption insurance, making it a more complete package for small business owners.

A business owner’s policy may also save your business money by offering comprehensive coverage that’s cheaper than buying each type of coverage a la carte. 

Who Needs a Business Owners Policy?

A Business Owners Policy (BOP) may be a good choice for small to medium-sized businesses that face potential risks both in property and liability. If your business has a physical location, like a store, office, or workshop, you might need a BOP to protect against property damage and liability claims.

Businesses that interact a lot with customers or the public, like restaurants, retail stores, and salons, can also be good candidates for a BOP because of the higher risk of liability claims, such as slips and falls or other types of accidents on the business premises.

If your business has assets that could be expensive to replace, like computers, specialized tools, or inventory, a BOP can help cover these costs in case of theft, damage, or other covered losses.

And small business loans require the business to carry insurance. 

If your business has a physical presence, interacts with the public, or has tangible assets that need protection, a Business Owners Policy can offer the comprehensive coverage you need to protect against a range of potential risks. 

Talk with your insurance agent to find out whether it makes sense for your business. 

What Does General Liability Insurance Cover?

General liability insurance is the most fundamental type of coverage. It helps protect businesses from financial loss if someone else claims the business has caused damage or injury. 

Here’s what it typically covers:

1. Bodily injury and property damage

This includes costs related to injuries or damages that occur on your business premises or as a result of your business activities. Let’s say a customer slips and falls in your store or office, or one of your employees accidentally damages a client’s property while on the job. This insurance can cover medical bills, repair costs, and legal fees.

2. Personal injury liability and advertising Injury

Personal injury liability coverage can protect the business from liability arising from what are referred to as “intentional torts,” such as libel, slander, invasion of privacy, wrongful eviction, and false arrest. 

Let’s say you operate a restaurant and one of your employees detains a customer but it turns out they left money to cover the check on the table, but it was under a napkin. If that customer decides to sue your business, this coverage may provide help with legal expenses.  

Advertising liability coverage offers protection for claims such as copyright infringement, stolen ideas or slander related to advertising. 

3. Medical payments

A customer bumps into your employee who drops a box on her foot. General liability insurance can provide quick payment for minor injuries to non-employees that occur on your premises or because of your operations, regardless of fault. A business may avoid larger drawn out lawsuits with this coverage. 

4. Defense costs

Lawsuits are expensive, and can quickly drain your business bank account. This coverage can help with legal defense costs if your business is sued over a covered claim, including attorney fees, court costs, and settlements or judgments.

Pro Tip: General Liability insurance typically doesn’t cover damages caused intentionally by the policyholder.

This type of policy doesn’t cover everything, though. Workers’ compensation insurance is designed to provide coverage if employees are injured on the job. Professional liability insurance may be required for professional mistakes. And other specialized types of insurance may be required for specific types of incidents and claims. 

How Are General Liability and BOP Insurance Similar?

General liability insurance and a Business Owners Policy (BOP) share some key similarities, primarily in the type of protection they offer. Here’s how they are similar:

1. Liability Protection: Both types of policies include liability coverage, which is essential for protecting your business against claims of bodily injury, property damage, and personal and advertising injury. This core coverage is fundamental to both types of insurance, safeguarding your business from at least some of the financial fallout of lawsuits and claims.

2. Third-party Claims: Both policies provide protection against claims made by third parties. If someone outside of your business, like a customer or client, suffers an injury or property damage connected to your business activities, both types of insurance can help cover the associated costs if they are covered by the policy.

3. Legal Defense: Both General Liability and BOP offer coverage for legal defense costs. If your business faces a lawsuit covered under these policies, they can help pay for attorney fees, court costs, and any resulting settlements or judgments.

The main similarity lies in their shared goal of protecting businesses from common liabilities. However, the BOP extends beyond this to include property insurance and potentially other coverages, offering a more comprehensive solution for small business owners.

What Is a Small Business Insurance Policy?

Your business will face all kinds of risks. Some you can manage, and some you can’t. 

Some you can insure against, and some you can’t.

A small business insurance policy is a type of coverage designed to protect small businesses from various risks and liabilities they face in their operations. It’s tailored to meet the unique needs and challenges of different types of businesses, providing financial protection against common business-related claims. Here’s what typically makes up a small business insurance policy:

1. General liability insurance 

Foundational insurance for businesses, it covers claims of bodily injury, property damage, and personal and advertising injury to third parties due to your business activities.

2. Property insurance

Insurance that can cover damage to your business’s physical assets, like buildings, equipment, and inventory, due to fire, theft, or other covered perils.

3. Business interruption insurance

Also known as business income insurance, it helps cover the loss of income if your business has to temporarily close due to a covered disaster, helping you keep up with ongoing expenses like rent and payroll.

4. Professional liability insurance 

Popular with businesses that provide professional services, this type of insurance (also known as errors and omissions (E&O) insurance), protects against claims of professional mistakes, negligence, or failure to deliver services as promised.

5. Cyber Liability Insurance

Digital threats to businesses are on the rise. This coverage protects against data breaches and other cyber-related risks.

A small business insurance policy can be customized with additional coverages based on specific industry risks and needs, providing a comprehensive shield against the potential financial impacts of unforeseen events. 

Depending on your type of business and business activities, you may need auto insurance for employees, commercial auto insurance, freelance and self-employed insurance, manufacturer’s insurance and more. 

Work with insurance professionals to create a policy that adequately protects your business.

How Much Does Business Insurance Cost?

Have you ever wondered why insurance companies require you to get an insurance quote before they will tell you how much a policy costs? That’s because the cost of business insurance depends on a number of factors, including your business size, location, industry risks, and coverage amounts. 

Here are factors that can influence your business insurance quote: 

1. Type of business 

Every type of business carries different types of risk. A business with trucks on the road has a different level of risk than someone who runs their business as a social media influencer. But both carry risk. The insurer will look at the business industry to provide a quote. (Not all insurance companies offer coverage for all types of business.)

Industry codes like NAICS and SIC Codes are often used to identify the industry. 

2. Coverage needs

The more comprehensive the coverage, the higher the cost. For example, a Business Owners Policy (BOP) that combines general liability and property insurance is usually more economical than purchasing each policy separately but costs more than just buying one or the other.

3. Business size and revenue 

Larger businesses with more employees, customers, and higher revenue generally face more risks, and higher risk can mean higher costs. 

4. Location 

We’ve all heard how it can be difficult to get certain types of insurance in parts of the country where natural disasters are common: think Florida for hurricanes or California for wildfires. Business insurance will often also cost more for businesses in higher-risk locations. 

5. Claims history 

A review of previous claims will likely be a part of the underwriting process. Businesses with a history of claims may face higher premiums as they are considered higher risk.

6. Credit history

Some insurers may check business credit, and may deny a policy if the report indicates serious financial problems or negative information like bankruptcy or judgements. Good business credit may help you qualify for lower rates on some products. 

Learn how to establish business credit. 

It’s best to get quotes from multiple insurance providers, considering the specific needs and risk profile of your business.

Tip: Need to finance your insurance premium over time? Find out whether you can pay your premium with a business credit card. Then consider a 0% intro APR business credit card to pay for the premium over time. 

Is a Business Owners Policy More Comprehensive Than Individual Personal Insurance Policies?

Yes, a Business Owners Policy (BOP) is typically more comprehensive than individual personal insurance policies because it is designed to cover a range of risks that businesses face, combining several types of insurance into one package. Here’s how it compares:

Scope of Coverage

Personal insurance policies, like homeowners or auto insurance, are designed to protect individuals and their personal property. They cover personal risks related to one’s home, car, health, and life. A BOP, on the other hand, is specifically tailored for business needs, combining general liability and commercial property insurance, and often includes business interruption insurance as well.

Protection for business assets 

BOPs provide coverage for business property, including buildings, equipment, inventory, and furniture, against damage or loss due to events like fire, theft, or natural disasters.

Liability protection

Like personal insurance, a BOP includes liability coverage, but it’s focused on the business context. It covers legal fees, medical expenses, and settlements related to business operations, such as customer injuries on premises or damages caused by the business’s services or products.

Business interruption coverage

This coverage helps compensate for lost income and pays for operating expenses if the business has to temporarily close due to a covered disaster. For some businesses, this coverage alone can provide a large amount of coverage if there is a covered claim.

Can I Use My Personal Insurance Policy for Business-Related Claims?

No, typically you can’t use a personal insurance policy for business-related claims. Personal insurance policies, such as homeowners, auto, or personal health insurance, are designed to cover personal risks and assets, not business activities or assets. 

Here’s why using personal insurance for business claims probably won’t work:

1. Coverage exclusions 

Personal insurance policies usually spell out exclusions for business-related activities. This means if you try to make a claim for something that happened while you were conducting business, your insurer is likely to deny it.

2. Risk assessment

Insurance companies assess risks differently for personal and business policies. Business activities often carry higher risks, which aren’t accounted for in personal insurance premiums.

3. Policy limits

Even if a personal policy doesn’t explicitly exclude business activities, the coverage limits may not be enough to cover business-related losses.

4. Potential for non-renewal or cancellation 

If your insurer discovers you are using a personal policy for business purposes, they might not only deny the claim but also cancel your policy or refuse to renew it.

Is Business Insurance Necessary for Home-Based Businesses, or Is Personal Insurance Sufficient?

It may be tempting to think you don’t need business insurance if you run a home-based business.

But failing to get the right insurance policy can turn out to be an expensive oversight. While personal insurance policies cover the individual and their personal assets, they typically don’t provide adequate coverage for business activities and assets. 

Here’s why you may need a Business Owners Policy (BOP) even if you operate your business from home:

1. Business property coverage

Personal homeowners insurance usually has limited coverage for business equipment and supplies. If you have significant business property, like computers, printers, inventory, or tools used for your business, a BOP can provide the necessary coverage for these items.

2. Liability protection 

If clients or customers visit your home for business purposes, personal liability coverage may not protect you if someone is injured on your property. A BOP includes general liability coverage, which can protect against such incidents.

3. Professional risks 

Home-based businesses might face specific professional risks, like data breaches or business interruption, which are not covered under personal insurance policies. A BOP can include coverage for these risks.

4. Business Interruption 

If your home-based business suffers from an event that disrupts operations, a BOP can provide business interruption insurance to cover lost income and ongoing expenses, something personal insurance does not offer.

The bottom line is you probably need both personal and business insurance if you run a business. You may think you can wait until something happens, but you can’t get insurance retroactively. 

Think of insurance as an essential cost of doing business, and one step in creating a viable business for the long run. If something does go wrong, you’ll be glad you have it. 

Take the next steps for your business insurance needs and get the protection your business.