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.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A BAKERY
Example 1: A visitor to your bakery is taking a tour when she stumbles and catches herself on a hot oven. The burns she sustains require medical care. She demands that your business pays for that medical care. You can likely get financial assistance from your general liability insurance policy to pay for her treatment.
Example 2: One of your bakers writes a blog about her experiences. In one of her recent blogs, she talks about why your bakery is better than a competitor’s bakery. The competitor sees the blog and decides to sue your business for libel. Your general liability insurance will pay for your legal defense against accusations of libel, including the cost of a settlement if one is required.
Example 3: A customer is leaving your store. She swings the door open to leave, steps into the doorway, and then stops to check her phone. The door swings back and hits her, knocking her to the ground and causing her to break her wrist. She sues your company for damages. Your general liability insurance will pay for your legal defense.
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
The average bakery 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.
OTHER TYPES OF COVERAGE BAKERIES 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 bakeries should obtain:
Commercial Property Insurance
All of your ovens, other equipment, and supplies for baking took a considerable investment to acquire. If you were to lose most or all of your property in an unexpected event like a fire, it would be expensive to pay for replacements. With a commercial property insurance policy, you can get financial help to pay for repairing or replacing the property that is lost in a covered event.
Product Liability Insurance
You bake your goods with care, but there is always the possibility that someone will claim that something you sold caused them injury or illness. If you have product liability insurance, your policy will pay for your legal expenses if a customer sues you for damages caused by one of your products.
TYPES OF COVERAGE SOME BAKERIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your bakery 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 Auto Insurance
If you have a vehicle that you use primarily for business, you need a commercial auto policy to protect your vehicle, those that drive the vehicle, and your business. Your state likely requires you to have a commercial auto policy. With such a policy, you have coverage if your vehicle is involved in an accident, both for property damage and for medical care to treat injuries.
Workers’ Compensation Insurance
Your state most likely requires you to carry workers’ compensation insurance if you have employees. Your policy will pay for medical treatment for employees injured performing work-related duties. It will also help to pay their lost wages while they recover from their injuries.
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.