Business Owners Policy vs. Commercial Package Policy and General Liability Insurance - A Small Business Owner Guide

When shopping for California business owners insurance to protect your business, the most common typical considerations are: BOP, CPP, and GL types of business package policies. These bundled policies allow the business to save money on insurance. The rest of business insurance options are individual coverages and add-ons.

BOP, CPP, and GL allow the insured business to bundle coverages under one policy for the ease of use. BOP and CPP policies both provide property coverage and liability coverage, while GL covers only liability claims.

• BOP is used by small businesses with low risk exposures
• CPP is used by larger companies or higher risk small businesses

Unlike a Commercial Package Plan (CPP), which allows business owners to choose the various combinations of coverages according to the business needs, Business Owner’s Policy (BOP) is pre-packaged as a set of commonly used coverages, with only a few options to add other coverages.

California commercial General Liability insurance can be used by businesses to protect themselves from various most-common business liability exposures.

Liability coverage limits of BOP, CPP, and GL can be increased by purchasing Commercial Umbrella Insurance.

When assessing your business coverage needs against a potential insurance policy, read all of the exclusions. Identify which policies you need to bundle in order to cover the identified exclusions and gaps in coverage. Consult with a knowledgeable California-licensed business insurance agent or insurance broker for help.

The more in depth differences between the Business Owner’s Policy, Commercial Package Policy, and General Liability policies in California are explained below:

BUSINESS OWNER’S POLICY (BOP)

A business owners policy provides a set of coverages that average California small business owners need. It combines standard commercial property insurance with general liability insurance. If additional coverages are needed, they can be added as extras or purchased as stand-alone supplemental policies.

Not every business qualifies for BOP coverage. A typical California company that uses BOP insurance has less than 100 employees, up to $1 million in annual revenue, and a low-risk business model.

BOP policy protects the insured small business owners from various risks, such as property damage, liability exposures, and crime. While some add-on coverages are available, BOP policies notably exclude the coverage for employees, vehicles, and professional services.

What Does a Business Owners Policy Cover?

BOP policies in California include three parts: Property and Liability are the two primary coverages, while Business Interruption is secondary and frequently optional:

Property Insurance

Property insurance for the building, the tenant build-out improvements, and the commercial property stored on the premises of the insured organization. Property on BOP can be insured from specific “listed risks” or under a general “all risk” coverage, where damage of any sort is covered. All-Risk policy is always more expensive than “Listed Risk”

Liability Insurance

Liability insurance protects the business in case if the actions or inactions of the business and its employees cause damage or injury to a third-party and a claim or lawsuit is filed against the insured business. Liability coverage also protects the business from product liability lawsuits, slander, and for copyright infringement.

Business Interruption Insurance

Business interruption insurance, also known as business income insurance, pays the costs associated with an interruption in business operation after a covered loss claim. For example, if a fire or a flood damaged the business and the office operations had to be shifted to a temporary location - the move and the temporary rent are covered.

If the business cannot operate due to a covered loss, business interruption helps you cover payroll while the business temporarily lost income.

Some insurers offer business interruption as a BOP add-on coverage.

BOP Endorsements and Riders

Besides the three main BOP coverages, you can typically further customize your California Business Owners Policy with additional endorsements and riders which may be offered by your insurance company, such as:

• Contract Liability coverage
• Cyber Liability and Electronic Data Loss
• Employee Dishonesty
• Employee Practices Liability
• Equipment Breakdowns
• Errors & Omissions (Professional Liability Insurance)
• Food Contamination
• Food Spoilage
• Hired or Non-Owned Auto Liability
• Liquor Liability
• Outdoor Signage

Not all insurers offer all these options. Speak with a licensed agent who has access to multiple competing insurance companies to discuss your options.

What Does a Business Owners Policy Not Cover?

California BOP policies exclude the following:

• Commercial auto insurance,
• Disability insurance
• Health insurance
• Professional Liability Insurance
• Workers Compensation Insurance

These coverages must be purchased separately or added to the policy as an endorsement or a rider.

BOP policies are convenient for small business owners and low-risk operations since they provide the most essential set of coverages at the lowest price. Speak with your California business insurance agent for more details.

What Is The Difference Between a BOP and Package Policy?

Unlike the Business Owners Policy, which provides almost a set-in-stone group of coverages, a Commercial Package Policy allows the insured business to shop for coverages a-la-carte, based on the business needs. If some risks need to be added or modified, CPP allows for it, while BOP has more add-on limitations. Most notably, CPP allows adding full coverage commercial auto insurance, while BOP typically allows only the liability portion of the coverage to be added.

High risk businesses typically get coverage through CPP, when a basic BOP is not flexible enough for all the risks. BOP is used by low-risk businesses.

Due to its flexibility, CPP is usually more expensive than BOP, but it can be less expensive if only two coverages are selected.

COMMERCIAL PACKAGE POLICY (CPP)

CPP means a commercial policy which allows you to package multiple coverages under one policy. CPPs are more specialized policies. Commercial Package Policy provides medium to medium-to-large businesses with the exact insurance protections they need. A typical California CPP-insured business has over 100 employees, annual revenues of over $1 million, and/or higher than normal inherent business risks.

CPP can help organizations lower their premium costs because it allows them to save more than they would with separate insurance policies. If coverage is not needed, it can be removed from the package to cut costs.

What Is Included in a Commercial Package Policy?

Commercial Package Policy lets you put together coverages based on the business needs. California CPPs can combine two or more of the following coverages:

• Commercial Property insurance
• Commercial General Liability coverage
• Commercial Auto insurance
• Commercial Crime
• Commercial Equipment Breakdown
• Commercial Inland Marine (on-ground transportation of goods) coverage
• Cyber Liability coverage and Data Breach
• Employee Theft
• Employment Practices (EPLI)
• Farm coverage
• Hired and Non-Owned Auto
• Liquor Liability
• Product Recall coverage
• Professional Liability protection, etc.

Placing multiple coverages under one policy means less administrative oversight and a single bill to pay instead of paying for several coverages separately. Speak with your business property insurance agent about how adding optional coverages to your policy can save on your overall business insurance needs.

What Is Not Included in a Commercial Package Policy?

Similarly to the Business Owners Policy, CPP insurance excludes Workers Comp coverage, which is required by law from all California businesses, and must be purchased separately. Your CPP insurer may be able to offer you Workers Comp coverage but it will be a separate policy. CPP also does not include life, group health, directors and officers (D&O), and any type of disability coverage.

GENERAL LIABILITY INSURANCE (GL)

General liability insurance coverage protects businesses against liability claims for property damage, bodily injury, and personal injury. General Liability coverage is part of Business Owners Policy and can be included in the Commercial Package Policy. General Liability insurance can be also purchased as a standalone policy. General liability insurance cost is determined by the number of employees, claims history, business location, and the specific business risks inherent to the type of business.

General Liability insurance coverage limit can be increased by either scaling the limit on the policy itself or by purchasing a Commercial Umbrella Liability Policy.

What is Included in General Liability Insurance Coverage?

California commercial general liability insurance coverage comes in three main sections:

• Liability on Premises - which covers injuries and damage on and off premises
• Liability for Products - which covers any damage or injury resulting from your products
• Liability for Completed Operations - which covers the damage that your completed work may cause (typically used by contractors and for construction)

General Liability insurance covers claims from:

• Bodily Injury
• Property Damages
• Personal and Advertising injury

Liability property damage and bodily injuries are typically a result of the business operations, or the use of its products and services, while personal injury is usually caused by libel, slander, and advertising.

What Does General Liability Insurance Cover?

General liability insurance typically pays for claims related to:

• Repairs or replacement of damaged property.
• Medical costs of the injured third-party.
• Legal expenses: attorney fees, court costs, settlements, judgments, and witness fees.
• Administrative costs to handle the claim.
• Settling personal and advertising injury. This is when someone typically loses money as a result of the insured business’ advertising campaign.
• Copyright infringement. For example, if a business uses a copyrighted item without permission.
• Violation of privacy.

What Is Not Included in General Liability Policy?

While General Liability insurance policy provides a lot of liability protections, it does not protect the business from:

• Commercial Auto Liability - business-owned and/or operated vehicles are covered by stand-alone Commercial Auto policy or included in the Commercial Package Policy
• Damage to Commercial Property - that is covered by Commercial Property Insurance, as part of a BOP or CPP, or as standalone coverage
• Employee Injuries - covered by Workers Compensation and Group Health insurance policies
• Faulty Workmanship Issues - can be covered by Contractors Professional Liability
• Intentional Acts - intentional damage or injury is excluded from all liability policies
• Liquor Liability - needs to be purchased separately or as an add-on

If you need additional liability coverage, ask your California insurance agent to check if your chosen coverages may be bundled with your current GL. If your insurer does provide coverage based on the business needs, you may need to get those coverages separately, through another insurer, or by switching to a BOP or CPP package bundle altogether.

Why Do You Need a General Liability Policy?

If a business or its employees cause property and/or bodily injury to a 3rd party, liability policy helps cover the costs of medical bills, legal fees, lawsuit settlement, and property repair or replacement.

Additionally, some California trades, especially in construction, may be required to have liability insurance to work.

You buy business General Liability either as part of a larger policy like Business Owners Policy or Commercial Package Policy or by itself.

Buying a GL business insurance bundle can be less expensive than buying coverages a-la-carte, but certain coverages are typically not included in the bundles. For example: cyber liability insurance and pollution liability coverage are typically purchased as stand-alone products. A business owner can add additional risks to an insurance contract in California by purchasing errors and omissions insurance to cover the liability of professional advisors such as consultants, lawyers, and insurance agents. Businesses can also purchase employment practices liability to cover claims related to sexual harassment and wrongful termination.

Speak to a California-licensed commercial insurance agent who has access to more than one insurance company. A knowledgeable agent can show you how to insure your business, get you a general liability insurance quote, and help you find the right coverage suitable for your business needs.