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 WASH
Example 1: A car wash customer steps out of his car and onto a slippery spot and falls, hitting his head on the ground and requiring medical treatment. He states that he will not file a lawsuit against your business, but he does demand that your business pays for his medical care. It is likely that your general liability insurance policy will pay for his medical treatment.
Example 2: A customer’s car gets stuck in the automatic car wash. When the car wash starts up again, it is misaligned and proceeds to scrape up the customer’s car, ripping off his mirrors and antenna and leaving gouges down the side of the vehicle. The damage to your customer’s property would likely be covered by your general liability insurance policy.
Example 3: When a customer gets his car back from your car wash and detailing team, he finds that there is damage to his vehicle. While your team says the damage was there before, the customer insists that it was not and goes so far as to file a lawsuit for damages. Your general liability insurance policy would pay for your legal fees, including for your attorney and any 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.
COST OF GENERAL LIABILITY INSURANCE
The average car wash 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 WASHES 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 washes should obtain:
Workers’ Compensation Insurance
The state you do business in likely requires that you carry workers’ comp insurance if you have employees. The policy you get will ensure that your employees can get medical treatment if they are injured performing job-related duties. Not only will the policy pay for medical treatment, but it will also help cover lost wages for employees who cannot work while they recover from work-related injuries.
Commercial Property Insurance
It takes a considerable investment to purchase all the equipment necessary to open a car wash business. If you were to have to replace your equipment due to an unforeseen event, like a fire, it might be difficult or impossible to cover the cost all on your own. But with commercial property insurance, you could file a claim with your insurer and get money from your policy as long as the damage was caused by a covered event. With the money from your insurer, you could get new equipment and get your business back up and running as soon as possible.
TYPES OF COVERAGE SOME CAR WASHES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your car wash 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
In most cases, general liability insurance will cover your business when damages need to be paid. But there are situations—like if you were to lose a major lawsuit—where your general liability insurance policy limits could be exceeded. If this were to happen, you would have to pay the rest of the damages yourself. However, if you have an umbrella policy, it will pick up where the general liability insurance leaves off.
Commercial Auto Insurance
If you have a vehicle that you use primarily for business, you need to carry commercial auto insurance. Your state probably requires that you carry such a policy for all of your business vehicles. With a commercial auto policy, your company vehicle and its driver are covered in an accident. The policy will also pay for property damage and for medical care for any injured people.
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.