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 BEAUTY SALON
Example 1: One of your stylists accidentally trips and cuts a client with a pair of shears. The client is understandably upset and demands that your business pay for her medical treatment. Your general liability insurance would likely cover this cost.
Example 2: A competing salon sends you a letter in the mail claiming that your new logo is too similar to theirs. They decide to sue you. Fortunately, your general liability insurance will pay for the cost of your legal defense as well as for a settlement if one is necessary.
Example 3: An employee fails to slow down when rounding a corner and runs into a salon customer. The customer is knocked to the ground and breaks her wrist. She sues your business for damages. Your general liability insurance policy will pay for your legal expenses, including the cost of hiring an attorney and the cost of any payouts or settlements that may be required.
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 beauty salon in America spends between $350-$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.
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OTHER TYPES OF COVERAGE BEAUTY SALONS 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 beauty salons should obtain:
Professional Liability Insurance
Professional liability insurance provides coverage against negligence claims due to mistakes or failure to perform. As a professional, there is always the risk that one of your clients will decide that your services have caused them harm. If a client sues your business, your professional liability insurance policy will pay for your legal expenses. It will pay for the cost of getting an attorney and the cost of a settlement if you settle out of court.
Commercial Property Insurance
It took considerable investment on your part to acquire all the supplies and equipment you use to operate your salon. If you were to lose most or all of your property in an unexpected event, like a fire, you might struggle to replace it so you can get back to business. But with a commercial property policy, if your property is destroyed by a covered event, you can file a claim and get help from your insurer.
TYPES OF COVERAGE SOME BEAUTY SALONS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your beauty salon 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.
Product Liability Insurance
Product liability insurance protects your business from lawsuits over the products you sell. It will pay for your legal fees if you are sued by a customer who claims your products caused them harm.
Workers’ Compensation Insurance
Workers’ compensation insurance is required by most states for employers. With workers’ comp, when an employee is injured performing work-related tasks, they can get their medical treatment paid for through the insurance policy. The policy will also help pay for lost wages while the employee recovers from his or her 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.