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 COFFEE SHOP
Example 1: A friend is visiting your new coffee shop when she stumbles on some uneven tile and bumps into your display shelves, bringing them down on top of her head. She is seriously injured and requires immediate medical attention. Your general liability policy will likely cover her medical bills.
Example 2: You’re bringing a few new chairs into the coffee shop, and a customer stops to let you pass by. As you back into the doorway with the dolly, you stumble and lose control of it. The dolly hits the customer, knocking her into the glass door and cutting her badly. She is angry and wants you to pay for her medical care. General liability insurance will likely cover her medical expenses and any possible legal fees.
Example 3: After interviewing a potential new barista, you give her a tour of the breakroom where she slips and falls on the wet floor. There was no caution sign displayed and she threatens to take you to court for her injuries, plus pain and suffering. Your general liability coverage will help pay for her medical bills as well as legal fees and any settlement costs.
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, coffee shops 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 coffee shops should obtain:
Workers’ Compensation Insurance
Workers’ compensation coverage is required in most states for any business that employs part-time or full-time workers. With this coverage, your employees’ medical bills will be covered if they are injured on the job. If they can’t return to work, they may be eligible to receive disability benefits as well.
Commercial Property Insurance
If your business property is damaged in an accident, it can be nearly impossible financially to replace everything on your own. Commercial property insurance will work to repair or replace your equipment, supplies, and owned real estate so that you can get back to business as soon as possible and not have to pay out of pocket.
In addition to the policies outlined above, there are a few other types of coverage your coffee 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.
Product Liability Insurance
While your team works hard to offer the highest quality products to your customers, there is always the chance that a customer may claim that one of your products caused them to become ill or injured. With product liability coverage, you can rest easy knowing that your legal defense and any resulting settlement from a claim filed against you will be covered.
Data Breach Insurance
Offering a customer loyalty program is a great way to thank your long-time customers for coming back again and again. When they sign-up for the program, they typically provide you with sensitive personal information that could be targeted by hackers. Data breach insurance can protect your business and offer an additional layer of financial protection in the event of a cyber attack and a resulting lawsuit.
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.