About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A AD AGENCY
Example 1: A potential client is meeting you at your office to discuss an ad campaign. While he is walking up the steps to the entrance, he slips and falls, breaking his wrist. He asks that you pay for his medical treatment, claiming that your steps are unsafe. Your general liability insurance policy would likely cover this expense.
Example 2: One of your competitors has sent you a letter claiming that your ad agency has libeled their business. You are fairly certain that the case has no merit, but you also realize that you need to hire an attorney regardless to protect your business. Your general liability insurance policy will cover the cost of hiring an attorney and pay for a settlement if one is necessary.
Example 3: An employee at your ad agency is late for work. She comes rushing into the office and fails to see a client. She knocks the client to the ground, and he breaks his arm. He decides to sue your business for damages. The general liability insurance policy you carry will pay for your legal defense costs as well as the cost of a settlement if needed.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
Cost of General Liability Insurance
On average, ad agencies in America spend between $450 - $750 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
OTHER TYPES OF COVERAGE AD AGENCIES NEED
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all ad agencies should obtain:
Workers’ Compensation Insurance
Workers’ compensation insurance provides financial protection for employees if they are injured performing work duties. If an employee is hurt, they can get medical treatment through workers’ comp. They can also get help with lost wages if they have to take time off of work to recover. Workers’ comp is required in most states for employers.
Professional Liability Insurance
A professional liability insurance policy will help to protect your business against claims of negligence due to errors or failure to perform. If a client sues your business over mistakes you made, or mistakes they claim you made, your policy will pay for your legal defense fees. It will also pay for the cost of a settlement if one is required to resolve the lawsuit.
TYPES OF COVERAGE SOME AD AGENCIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your ad agency may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Commercial Umbrella Insurance
The general liability insurance policy you carry will be sufficient to protect your business in many situations, but it is possible for the limits of your policy to be exceeded—like if you lose a major lawsuit. If your general liability insurance runs out, you are left to pay the remaining damages out of pocket. However, if you have a commercial umbrella policy, it will cover excess damages when your general liability policy’s limits are exceeded.
Commercial Property Insurance
All of the equipment and supplies you have invested in to run your business would be costly to replace if it were damaged or destroyed, such as if a fire broke out and destroyed your office. A commercial property insurance policy provides financial protection against such situations if your property is damaged by a covered event.
Additional Steps to Protect Your Business
Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
Frequently Asked Questions
What is included in a business owner’s policy?
A typical business owner's policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company's needs.
What is the difference between business insurance and general liability insurance?
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.