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 RENTAL COMPANY
Example 1: While walking to their rented vehicle, one of your customers slips on ice in the parking lot. The incident causes several injuries, some of which require medical attention. General liability insurance would likely cover the cost of treatment for the injuries.
Example 2: When posting on social media, your company’s manager makes a comparison to another rental car company. The comparison is factually inaccurate and puts your competitors in a bad light. They file a libel lawsuit in response, which general liability insurance would cover.
Example 3: Your car rental company runs an ad in the local newspaper that includes rates you don’t actually offer. Customers file a class action false advertising lawsuit against your company, and the legal fees and settlement are expensive. General liability insurance would probably cover the lawsuit.
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 rental company 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.
OTHER TYPES OF COVERAGE CAR RENTAL COMPANIES 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 rental companies should obtain:
Commercial Property Insurance
If your rental car company owns its office space and/or parking lot, those assets should be protected with commercial property insurance. This coverage insures buildings, other structures, and certain equipment (usually not including rental cars).
Commercial property insurance can be purchased through a business owner’s policy (BOP).
Commercial Auto Insurance
Commercial auto insurance is used to insure commercial vehicles, including rental cars. Your rental car company will need this coverage for every vehicle that it owns and rents.
Rental cars tend to have high values because they’re fairly new and have low mileage. Make sure the limits of your company’s rental car insurance equal or exceed the business fleet’s fair-market value.
Commercial auto insurance is frequently available through a package policy.
Workers’ Compensation Insurance
Most car rental companies need workers’ compensation insurance because they employ workers. Most states require businesses that have employees to carry workers’ compensation coverage for them. The coverage is a safeguard against injuries and illnesses related to activities at work.
TYPES OF COVERAGE SOME CAR RENTAL COMPANIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your car rental company 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
If you’d like to protect your car rental company with more liability coverage, you may want commercial umbrella insurance. This insurance provides a secondary layer of liability protection, and limits can often be set in the millions of dollars.
Commercial umbrella insurance is often available through a BOP.
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.