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.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A HOME SECURITY COMPANY
Example 1: While installing a home security system, you spill coffee on the client’s state-of-the-art laptop. It is badly damaged by the liquid and requires extensive repairs. Your business would probably be covered by a general liability policy for the resulting damages.
Example 2: As you install a security system, you inadvertently cause an electrical issue, requiring the attention of a professional electrician. The electrician’s bill is quite expensive. In this case, general liability insurance would likely cover some of what your business owes in damages.
Example 3: Your logo is found to be extremely similar to an out-of-state competitor’s existing business logo. You are served with a lawsuit for copyright infringement. If you were found liable, general liability insurance would probably help cover some of the damages, or any settlement reached between your business and the other company.
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.
On average, home security companies in America spend between $400 - $700 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 home security companies should obtain:
Professional Liability Insurance
Businesses that perform technical services might be held liable for negligence or omissions regarding these services. Professional liability insurance is a critical policy for a home security business in the event that the system fails and serious harm to the customer or their property results. An undetected break-in, for instance, could be catastrophic to a security company. This policy could provide some coverage for instances of that nature.
Commercial Auto Insurance
Home security businesses will be taking their services to clients’ homes as needed, and that means driving. Commercial auto insurance will provide your business coverage in the event of automotive accidents.
Commercial Property Insurance
Businesses that rely on equipment, tools, and other material assets will need a commercial property policy. If your commercial real estate, vehicles, or other commercial items are damaged by fires or violent weather, commercial property insurance can help to cover the damages, preventing your business from suffering the potentially prohibitive costs of reinvesting in expensive inventory/tools.
In addition to the policies outlined above, there are a few other types of coverage your home security company 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
Running your business solo can save on costs, but if you plan to expand your business into one with a wider range of operations, you need employees. In most states, part-time and full-time employees must be covered with a workers’ compensation policy. This covers any workplace-sustained injury, protecting your business from employee lawsuits and helping to compensate injured workers. Disability and death benefits are also provided through workers’ compensation policies.
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.