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 COWORKING SPACE
Example 1: A woman who purchases space from your business falls on some ice while walking in from the parking lot. She decides that your company is responsible for her injuries because you did not clear the ice and sues you. The general liability insurance you carry will pay for your legal defense fees, including the cost of a settlement if necessary.
Example 2: A competing coworking space business has decided that your new marketing campaign libels their business and sues you over it. The general liability insurance you have will pay for your legal fees in such a situation.
Example 3: One of your maintenance team members is working to fix a leaky sink in the restroom. He is rounding a corner in the building when he runs into a customer, knocking her to the ground. The customer breaks her wrist and asks that you pay for her medical treatment. The general liability insurance you carry will likely cover this expense.
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 coworking space in America spends between $400-$700 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 COWORKING SPACES 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 coworking spaces should obtain:
Commercial Property Insurance
All of the office furniture and other equipment you have purchased for your coworking spaces would be expensive to replace if you lose it in a fire or other disaster. Commercial property insurance is designed to protect your business in such a situation. If the loss occurs due to a covered event, you can file a claim and get financial help replacing your commercial property.
Workers’ Compensation Insurance
If an employee is hurt performing job-related duties, a workers’ compensation policy will pay for his or her medical treatment. It will also help to pay for lost wages for employees who cannot work while they recover from their injuries. Most states require employers to carry workers’ comp coverage.
TYPES OF COVERAGE SOME COWORKING SPACES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your coworking space 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 Umbrella Insurance
The general liability insurance policy you carry will protect your business from most liability concerns, but it is possible for your policy limits to be exceeded in certain situations—like if you lose a big lawsuit. If the limits are exceeded, you will be left on the hook for whatever damages remain. However, if you have an umbrella policy, the policy will kick in to cover the excess expense.
Commercial Auto Insurance
If you have a car or truck that you use primarily for business, you need a commercial auto policy to protect the vehicle, the driver, and others on the road. The policy will pay for damages to your vehicle and to other vehicles if you are responsible for an accident. It will also pay for medical treatment for the injured.
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.