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.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A BAGEL SHOP
Example 1: A customer purchases a bagel and a large cup of coffee. The coffee cup slips out of her hand and spills, causing burns that require medical care. She decides to take legal action against your business, claiming you were responsible for her injuries. The general liability insurance policy you carry would pay for the cost of your legal defense. It would also pay for the cost of a settlement if you pay to settle out of court.
Example 2: A customer is coming in from the parking lot to your bagel shop and slips on a patch of ice, breaking his hip. The customer asks that you pay for his medical treatment. Your general liability insurance policy will likely help to pay for his medical care.
Example 3: A few weeks after implementing a new marketing campaign, you are notified by an attorney that a competitor is suing your business for libel due to your marketing message. You do not have to worry about paying for your legal defense because you have a general liability insurance policy. Your policy will pay for your legal fees as well as a settlement if the case is settled out of court.
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.
The average bagel shop in America spends between $500-$1,200 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.
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 bagel shops should obtain:
Product Liability Insurance
There is always the possibility that a customer will claim that your products caused him or her injury. Your policy will pay for defending yourself legally from such claims, as well as for any payouts or settlements if you settle the case outside of court.
Commercial Property Insurance
The equipment you use to make your bagels and the various supplies you keep on hand to make those bagels would be expensive to replace if damaged or destroyed. To avoid needing to pay these costs out of pocket—which for some businesses is not possible following a disaster—you need commercial property insurance. In the event of a fire or other event covered by your policy, you can file a claim with your insurer and get financial help replacing your equipment and supplies. The sooner you can get everything replaced, the sooner you can start doing business again.
In addition to the policies outlined above, there are a few other types of coverage your bagel shop 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.
Workers’ Compensation Insurance
Workers’ compensation insurance is a necessity for employers for multiple reasons. First, most states require workers’ comp insurance if you have employees. Second, if an employee is injured performing a job-related task, your workers’ comp policy will pay for treatment for job-related injuries and will help to cover lost wages while the employee recovers from those injuries.
Business Interruption Insurance
If there is a major loss that leads to the shutdown of your business for a period of time, it may be difficult for you to cover your business and personal costs. The loss of revenue can be mitigated by business interruption insurance. Major events like tornadoes, fires, or the destruction of your storefront would be covered by your policy. You would have some financial assistance to whether the gap in your business operations.
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.
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.