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.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A CHOCOLATE MAKER
Example 1: While you're giving a demonstration on hand-dipped chocolates, an excited child breaks free from his parents grasp and sticks his hand into the chocolate tempering machine. He badly burns his forearm and breaks one of his fingers in the process. His parents are angry that the area wasn’t sectioned off properly and threaten to sue you for damages. General liability coverage will likely pay for his medical bills and any resulting legal fees.
Example 2: Your cleaning crew has just finished mopping the floor in the restrooms when a customer slips and falls. There was no wet floor sign put down at that moment, and you know you could be found responsible for their injuries. With general liability insurance, you can cover their medical costs and any potential settlement.
Example 3: During a tour of your facility, someone trips over an extension cord in the office area and falls into a large shelving unit, sustaining serious injuries. General liability insurance will likely cover their medical bills and your legal fees if a lawsuit results from the accident.
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.
On average, chocolate makers in America spend between $500 - $1,200 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.
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 chocolate makers should obtain:
Workers’ Compensation Insurance
Most states require that business with part-time and/or full-time employees must carry workers’ compensation insurance. This insurance policy helps to cover medical costs if any of your employees become injured while on the job. Additionally, if they are unable to return to work for a period of time, your policy will provide disability benefits.
Product Liability Insurance
Any time that you create a product that will be consumed by the general public, you need to protect your business from the threat of a lawsuit. If a customer falls ill after ingesting one of your products or somehow sustains a serious injury, you could be sued for damages. With product liability coverage you can rest easy knowing your business will be protected in these types of situations.
In addition to the policies outlined above, there are a few other types of coverage your chocolate maker 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 Auto Insurance
Making deliveries may be an important part of your daily business operations. And whether or not you use a designated delivery truck or you rely on personal vehicles, you need to invest in a commercial auto insurance policy for maximum protection. Your personal car insurance will not cover your personal vehicle while you’re performing work duties.
Commercial Umbrella Insurance
It is possible for an accident or lawsuit to use up all of the available funds provided by your primary insurance policy limits. If this happens and you don’t have additional coverage, you could be left to pay the remaining expense on your own. Commercial umbrella insurance goes beyond your primary insurance limits to provide the funds you need to keep your business operating smoothly.
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.
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.