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 CLOTHING BOUTIQUES
Example 1: One of your customers leaves a pair of slacks with you to be altered. During the alteration process, the clothing is damaged beyond repair. Should the customer opt to sue you, your General Liability policy would kick in and pay for costs associated with this claim.
Example 2: A customer is interested in trying on a sweater that is displayed on the top shelf. A boutique employee asks the guest to wait for assistance and walks away to grab a small ladder. Instead of waiting, the customer reaches for the sweater, causing a nearby display to fall on their head. Your policy will recover costs related to the ensuing lawsuit.
Example 3: Heavy rain occurs during a busy Saturday shift, causing customers to track in water and mud. To reduce potential exposure, you place a welcome mat by the front door for guests to wipe their feet. As a customer is rushing to get out of the rain, she slips and falls, breaking her wrist trying to catch her fall. Even though you took all necessary precautions to avoid such an incident, the disgruntled customer sues your business. Your policy will cover charges associated with 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.
The average clothing boutiques in America spends between $350-$750 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 clothing boutiques should obtain:
This coverage offers another layer of protection for your inventory and cash register contents. If an employee steals out of the cash drawer, or a customer shoplifts several pieces of jewelry, Crime Insurance will help reduce the effects of these losses.
If you own your location instead of renting, you need property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.
This coverage is generally offered in a Business Owners’ Policy (BOP)
In addition to the policies outlined above, there are a few other types of coverage your clothing boutiques 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
If your clothing boutiques has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.
Business Interruption Insurance
In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.
This type of insurance is typically included in a business owner’s policy.
Commercial Umbrella Insurance
Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.
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.