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.

Learn more about the risks covered by general liability insurance.

COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A CUPCAKE BAKER

Example 1: During a tour of your bakery, one potential investor falls behind to look at your decorating station. As they hurry to catch up with the group, they walk into a hot oven door and burn their arm. Their injuries require a hospital visit and extensive treatment. General liability coverage would cover their medical costs and any damages if they decide to sue.

Example 2: A customer comes into your bakery and slips on a wet floor. During the resulting fall, they break their wrist and hit their head. If the customer sues for damages, general liability insurance would cover your legal costs and any payouts awarded in the lawsuit.

Example 3: As a delivery driver backs into your loading dock, the overhead door malfunctions and slams down on the delivery van. The driver is uninjured, but the van is badly damaged and unsafe to drive. General liability insurance would cover the vehicle repair costs and any damages associated with a resulting 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.

Cost Of General Liability Insurance

On average, cupcake bakers 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:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • 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.

Recommended action box icon

How much will the right insurance cost you?

Find what business insurance will cost for your business right now

Get a Free Quote

Other Types Of Coverage Cupcake Bakers 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 cupcake bakers should obtain:

Product Liability Insurance

While you stand behind every cupcake you sell, there’s always a chance a customer could become ill from eating one of your cupcakes or experience another issue with your product. This insurance would cover damages related to any of the baked goods you sell as well as your legal fees if a customer decides to sue.

Workers’ Compensation Coverage

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability benefits stemming from a work-related accident.

Types Of Coverage Some Cupcake Bakers May Need

In addition to the policies outlined above, there are a few other types of coverage your cupcake baker 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 Coverage

A comprehensive business insurance policy protects your bakery from common operational risks. However, some situations may exhaust your primary policy limits and leave you to pay the excess legal fees and damages out-of-pocket. Commercial umbrella insurance provides peace of mind with protection beyond your primary policy limits.

Business Interruption Insurance

Closing your doors for repairs after an accident can seriously hurt your business. If a fire breaks out at your bakery or severe weather damages your storefront, business interruption insurance would cover some of your financial losses until you can reopen.

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.