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 CUSTOM CAR SHOP
Example 1: As you finish restoring a custom car and lower it down from the hydraulic lift, you realize it wasn’t secured properly and end up smashing the back end. General liability insurance will likely cover any damage to the vehicle and necessary repairs for your lift as well.
Example 2: A customer comes into the service bay to check on the status of their vehicle restoration. As they tour the shop, they trip over a cord and break their wrist. With general liability insurance, you can rest easy knowing that the damages associated with a lawsuit will likely be covered by your policy.
Example 3: As you move a fully restored custom car from the service bay out into the parking lot for pick-up, you accidentally smash into a side door. General liability insurance will likely cover the damages to the vehicle and the door as well.
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 custom car shop in America spends between $500-$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.
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OTHER TYPES OF COVERAGE CUSTOM CAR 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 custom car shops should obtain:
Workers’ Compensation Insurance
Most businesses are required to carry workers’ compensation coverage by state law. If one of your employees becomes injured on the job, this type of insurance policy will help to pay for their medical expenses and lost wages.
Commercial Property Insurance
If you own the building that your custom car shop operates out of, you should invest in commercial property insurance to protect the building and any business-related items stored inside. This coverage can help to cover the cost of damages after a fire, inclement weather, theft, and vandalism.
TYPES OF COVERAGE SOME CUSTOM CAR SHOPS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your custom car 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.
Garage Keeper’s Liability Insurance
If you keep custom cars on your lot for an extended period of time, they are at risk of being stolen or vandalized by burglars. This specialized insurance coverage is designed to help cover the cost of repairs or the replacement of stolen vehicles.
Commercial Auto Insurance
Your personal auto insurance will not protect business vehicles. If you are involved in an accident or cause damage to another person’s property while operating a work vehicle, commercial property insurance works to cover associated damages.
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.