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 CAR DEALERSHIP
Example 1: A customer is walking across the lot and does not see an obstacle. He falls and breaks his arm. Your general liability insurance policy will pay for the medical treatment for his injuries so your company does not have to.
Example 2: An employee is moving a car from one area of the lot to another when he accidentally hits a customer who is car shopping. Although the speed of the vehicle was not high, it still causes the customer significant injuries both from the impact with the car and the impact with the ground. The customer files a lawsuit against your business. Your general liability insurance policy will cover the fees associated with the lawsuit, including a settlement if the case is settled out of court.
Example 3: The new advertising campaign you paid for goes after the competition pretty fiercely, which causes your competitor to sue your business for libel. The general liability insurance policy you carry will pay for your legal costs whether you win or lose the case. It will also pay for a settlement if you settle the case outside 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.
COST OF GENERAL LIABILITY INSURANCE
The average car dealership in America spends between $450-$1,000 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 CAR DEALERSHIPS 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 car dealerships should obtain:
Commercial Property Insurance
The value of your commercial property is substantial. If an unexpected disaster occurs, such as a major storm or fire, and that disaster destroys some or all of your automobiles, it may be enough to put you out of business. As the owner of a car dealership, you should carry commercial property insurance with limits high enough to account for the high value of your inventory.
Workers’ Compensation Insurance
Carrying workers’ comp insurance is an important part of being an employer, and most states legally require it. Not only does carrying this insurance keep you in legal compliance, but it also ensures that your employees can get the medical care they need for any job-related injuries. Your workers’ comp policy will cover both medical care and lost wages if employees are unable to work due to their injuries.
TYPES OF COVERAGE SOME CAR DEALERSHIPS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your car dealership 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
Commercial umbrella insurance sits on top of a general liability insurance policy, picking up where the limits of the general liability policy left off. In a situation where your general liability policy limits are exceeded, such as if you lose a major lawsuit, you can depend on the umbrella policy to take over and pay the damages until the limits of the umbrella policy are reached.
Business Interruption Insurance
If a major event causes your business to shut down for a period of time—like after a tornado or other major disaster—then business interruption insurance would help to cover your business expenses and potential lost income during the downtime.
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.