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 CIGAR SHOP
Example 1: A customer walks into the restroom of your cigar shop and slips and falls on the tile floor, sustaining a broken arm. He wants your business to pay for his medical care to treat the injuries. Your general liability insurance policy will likely help you cover the cost of paying for medical treatment when a customer is injured at your business.
Example 2: One of your cigar shop employees is carrying a stack of boxes and is unable to see past the boxes without stretching his head around the stack. He quickly rounds a corner and runs into a customer. The impact knocks the customer over and he hits his head on the floor, sustaining a concussion. The customer files a lawsuit against your business, demanding damages. Your general liability insurance policy will pay for the cost of defending your business, including the cost of an attorney and any settlement you may wind up paying.
Example 3: A visitor to your cigar shop is walking across the parking lot when she slips on some ice and sustains serious injuries. Your general liability insurance will likely help to pay for treating her injuries. It will also pay for any legal costs if the visitor decides to take legal action.
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 cigar shop in America spends between $400-$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 CIGAR SHOPS 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 cigar shops should obtain:
Product Liability Insurance
As a seller of products, there is always the risk that one of your customers could file a lawsuit against your business claiming that one of your products caused him or her injury. For instance, if a lighter explodes in the face of a customer, he may decide that your business is responsible for his injuries. A product liability insurance policy will pay for your legal fees if you need to defend your business in court. It will also pay for any payouts or settlements in you settle the case out of court.
Commercial Property Insurance
In the event of a fire or other catastrophic event, your cigar and smoking supplies inventory could be destroyed. Replacing your inventory on your own could be costly, and it may not even be possible depending on its value. A commercial property insurance policy will cover the costs of replacing your inventory. That means you can purchase new stock and start selling cigars again, bringing in much-needed income.
TYPES OF COVERAGE SOME CIGAR SHOPS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your cigar shop 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.
Workers’ Compensation Insurance
The majority of states require businesses to carry workers’ comp insurance when they have employees. Workers’ comp insurance is a good idea for your business for a variety of reasons. If one of your employees is injured while performing a task related to his or her job, then workers’ comp insurance will pay for medical treatment. The policy will also help to cover the lost wages of the employee while he or she recovers.
Commercial Umbrella Insurance
There is always the possibility that the limits of your general liability insurance will be exceeded. This can happen if your company loses a serious lawsuit and is required to pay extensive damages. If your general liability insurance policy limits are exceeded, then you will be forced to pay the remaining amount yourself—unless you have commercial umbrella insurance. An umbrella policy will pick up where the general liability insurance leaves off.
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.