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 HAIR SALON
Example 1: One of your hair stylists trips over a cord and cuts a customer with her shears. The customer is extremely upset by the accident and decides to file a lawsuit against your salon. Your general liability insurance would pay for your legal fees while defending your business. It would also pay for a settlement if the case is settled out of court.
Example 2: A salon customer is walking into your business from the parking lot when she steps on a patch of ice outside your door. She falls and breaks her hip. She asks that your business pays for her medical treatment since the accident happened on your property. The general liability insurance policy you carry would likely cover her medical expenses.
Example 3: A competing salon sues you, claiming that your new logo is too similar to theirs. The general liability insurance you have will pay for your legal fees, as well as for any payouts or settlements that are required to resolve the case.
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.
The average hair salon in America spends between $350-$750 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.
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 hair salon should obtain:
Professional Liability Insurance
As the provider of salon services, you would benefit from professional liability insurance designed specifically for your circumstances. Your policy would protect your business if one of your customers claimed that your services caused them harm and filed a lawsuit against your business. You should talk to your insurer about whether your policy protects your employees and/or independent contractors working for you. Those working for you will need to decide if they need additional protection beyond your policy.
Commercial Property Insurance
The various salon equipment and supplies you own, as well as your inventory of salon products, would be expensive to replace if you were to lose it in an unexpected event like a fire. A commercial property insurance policy will help cover the cost of replacing property lost in covered events. That way you can get new equipment and supplies and get back to doing business.
In addition to the policies outlined above, there are a few other types of coverage your hair salon 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
If you employ the workers at your salon, then you are most likely required to carry workers’ comp insurance by the laws of your state. With a workers’ comp policy, your employees will have protection if they are injured performing work-related duties. The policy will pay for medical treatment and will help pay for lost wages while injured employees recover.
Commercial Umbrella Insurance
The general liability insurance policy you carry is a good foundation for protecting your business, but it is possible to exceed your general liability policy limits in certain circumstances—like if you lose a major lawsuit and are required to pay extensive damages. With just a general liability insurance policy, you would need to find a way to pay the damages that were left after the policy ran out. But if you have an umbrella policy in such a situation, once the limits of your general liability policy are exceeded your umbrella policy will kick in and pay until its limits are reached.
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.
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.