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 HARDWARE STORE
Example 1: One of your warehouse stockers runs into a customer with a forklift while stocking inventory. The customer sustains an injury that prevents him from going to work for a month. In this case, general liability insurance would cover fees or settlements related to the accident if the customer files a lawsuit against the business.
Example 2: A buzzsaw blade is packaged incorrectly and falls out of the box when the customer tries to lift it and bring it to the cashier, injuring the customer’s foot. General liability insurance would cover any medical expenses, legal fees, or settlements related to the accident.
Example 3: One of your employees goes to a customer’s home to install an air conditioner that the customer purchased in your store. The employee incorrectly installs the unit, which subsequently leaks and eventually causes black mold to grow in the walls. General liability insurance will usually cover this type of situation as long as it can be linked to the initial installation.
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 hardware store 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 HARDWARE STORES 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 hardware stores should obtain:
Commercial Property Insurance
Commercial property insurance covers damage to property you own (such as real estate, tools, supplies, and inventory) that is caused by fire, vandalism, or inclement weather. This is an especially important coverage to have if there are flammable or otherwise hazardous chemicals on site.
Workers' Compensation Insurance
Workers at a hardware store face a higher risk of injury than at many other businesses. Workers' compensation insurance covers your employees’ medical expenses and any legal costs that come as a result of an injury on the job. It is often required for businesses to remain compliant under state law.
TYPES OF COVERAGE SOME HARDWARE STORES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your hardware store 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 Auto Insurance
All states mandate that a person or business carry auto insurance if they drive vehicles on a public roadway. Whether you are using a vehicle for bank deposits or to run inventory, this insurance will protect against costs related to bodily injury and vehicle damage while driving.
Hardware stores often carry small items that can be easily stolen. Although general liability insurance protects your store from common crimes like shoplifting and vandalism, it does not protect from theft by employees. In some cases. crime insurance can also protect your business against any crimes that your employees may commit to your customers while off-site.
Electronic Data Coverage
As a retail store owner, you are likely given access to sensitive personal and financial information about your customers. Many of these clients may be other businesses. It is important that you have protection against deletion, tampering, or theft of that data. Electronic data coverage makes sure your business does not bear the brunt of any crime or inconvenience that may occur because of problems with your data.
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.