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 AN ESCAPE ROOM BUSINESS
Example 1: In your escape room, a customer is exposed to a container full of non-venomous snakes. The customer becomes erratic and eventually decides to sue your business. His attorney writes that you are at fault for failing to provide foreknowledge that snakes, “reasonably predictable sources of psychologically valid phobias,” were present in the escape room. General liability insurance could probably cover your business’s losses in the event of a court order or settlement for the plaintiff’s resulting psychiatric sessions.
Example 2: A new employee forgets to administer bodily harm waivers to a pair of customers. The theme of their escape room is pitch-black darkness, and one of the customers walks into a wall, breaking his nose. The customer’s nasal surgery will be expensive, and while a waiver cannot always protect your business, you are far more vulnerable without one. The customer decides to sue your business. General liability insurance would likely provide coverage for damages owed or settlements reached regarding the accident.
Example 3: Your business is being sued for failing to release a customer from her escape room in a timely manner. She claims that she shouted to be released from the room many times and that your staff did not respond, forcing her through the 40-minute duration of the escape experience. Neither you nor your employees heard anything through the door, but there is no footage of the incident to corroborate your testimony. If the court found your business liable, you could expect general liability insurance to help cover damages owed.
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 escape room business in America spends between $500 - $1,100 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 ESCAPE ROOM BUSINESSES 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 escape room businesses should obtain:
Commercial Property Insurance
Escape room businesses require real estate and a substantial collection of physical assets including tools, props, costumes, and more. A policy of this kind is essential for the protection of equipment used in your carefully organized escape room scenarios, as well as any business-owned real estate. Fires, in particular, can be devastating to an escape room business, but violent storms and similar weather disasters may also lead to the damage or destruction of your expensive business assets. Commercial property insurance can protect a business against these and similar threats.
Business Interruption Insurance
While somewhat similar to commercial property insurance, business interruption policies offer equally important coverage for escape room companies. Covering disasters like those mentioned above, this insurance will assist in recovering estimated losses and cover temporary relocations during downtime that occurs due to weather or other disasters. This policy can ease the process of recovery after a business’ assets have been compromised.
TYPES OF COVERAGE SOME ESCAPE ROOM BUSINESSES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your escape room business 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.
Workers’ Compensation Insurance
You might begin an escape room business alone, but if your business is successful, you will probably want to grow and include more escape rooms or even new locations. Workers’ compensation insurance is necessary for companies that employ part-time or full-time workers. Most work-related accidents that cause injuries to employees will be covered in this policy.
This is a special kind of policy that functions atop existing policies. Essentially, it covers an even broader range of possible claims than individual policy limits will allow. As you operate your escape room business, you may be surprised to see how different customers behave in your rooms. Any unexpected claims that arise from these unpredictable encounters could be covered by the extended safety net of umbrella insurance.
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.