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 CARPENTER
Example 1: A load-bearing wood structure collapses on a client while he is surveying your work in progress. If held liable, your business would probably have some coverage under a general liability insurance policy for damages incurred or a settlement reached outside of court.
Example 2: The custom entertainment center you are building in a client’s home tips over when the family dog bumps into it during a game of fetch. It knocks over an antique urn, spilling ashes all over the floor and shattering the urn. The urn is worth several thousand dollars, not to mention emotional damages incurred. If you were found liable, general liability insurance would probably help cover some of these damages or any settlement reached between your business and the client.
Example 3: While carrying heavy wooden supplies down a client’s staircase, you bump into her and knock her down several hard steps. She breaks her ankle and later sues your business over the incident. If found liable, your business would probably be covered for some of the resulting damages or a settlement reached between you and the client.
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 carpenter in America spends between $500-$1,500 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 CARPENTERS 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 carpenters should obtain:
Professional Liability Insurance
A business that performs any sort of service for its customers can be held liable for damages resulting from these actions or even for simple negligence and omission. Professional liability insurance can cover some of these damages in the event your carpentry business is found liable. Unsturdy structures that break and cause injury or projects that are simply dissatisfactory are potential liabilities for a carpenter.
Commercial Property Insurance
If a disaster like a fire or strong storm damages or destroys your equipment, tools, resources, commercial vehicles, or owned real estate, a commercial property policy will help to cover these damages, saving your business from losses and a steep reinvestment.
TYPES OF COVERAGE SOME CARPENTERS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your carpenter business 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.
Home-Based Business Insurance
If you prefer to save on rent and operate out of your own house, your standard home insurance may not cover episodes that arise in the context of your business’s operations. You could be found liable for damages incurred on the premises of your house during business hours. A home-based business policy can cover commercial-oriented accidents that occur in your home business. This policy can be purchased as part of a business owner’s policy or as an extension (known as a rider) to your existing homeowner’s insurance policy.
Commercial Umbrella Insurance
Commercial umbrella insurance is an add-on policy that supplements maxed-out insurance coverage. If you think your business could potentially face a costly lawsuit, this type of policy can give you peace of mind that you’ll be financially covered.
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.