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 DAYCARE
Example 1: After a parent drops their child off at daycare, the child becomes upset and runs into some glass doors with a toy in their hand. The impact causes the glass to shatter and leaves the child cut badly enough to receive stitches. General liability coverage will likely cover any damages involved in a lawsuit.
Example 2: A new family is touring your daycare after hours, and one of the parents slips and falls on the freshly cleaned floors. With general liability insurance, you can protect your business and pay for any damages if you are sued.
Example 3: During outdoor recess, a toddler manages to climb to the top of the jungle gym unnoticed by a caregiver. While playing, they fall from the top of the structure and break an arm. Your general liability insurance will likely cover their associated medical bills and any other damages.
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 daycare in America spends between $300-$800 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 DAYCARES 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 daycares should obtain:
Commercial Auto Insurance
Your personal car insurance will not cover any accidents or situations where a work vehicle causes property damage to another car on the road. Commercial auto insurance is necessary for any cars that are used for business purposes.
Workers’ Compensation Insurance
If one of your employees becomes injured or ill on the job, workers’ compensation insurance can help to cover their medical bills and lost wages. This type of insurance is required in most states for any business that employs part-time or full-time workers.
TYPES OF COVERAGE SOME DAYCARES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your daycare 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.
Home-Based Business Insurance
If you operate your daycare from your home, your homeowner's insurance policy may not cover accidents that are related to your business. This type of policy can be tailored to meet your specific needs and provides an extra layer of protection for your home in the event of an accident or lawsuit.
Commercial Umbrella Liability Insurance
Operating a business involving the care of small children comes with a variety of different risks, and the liability expenses associated with a lawsuit could very well exhaust your primary policy limits. With the help of commercial umbrella liability coverage, you can rest easy knowing you have an extra layer of protection in the event that the damages associated with a lawsuit exceed the limits of your primary policies.
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.