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 HOT SAUCE COMPANY
Example 1: To produce your hot sauce, you may have to operate out of a large warehouse space that includes lots of different machinery and tools. In these types of buildings, the risk of common accidents and injuries is increased. Luckily, with the help of general liability coverage, you can protect any visitors to your workspace in the event that they become injured after a slip and fall or their personal property is damaged.
Example 2: As your business grows, there's a good chance that you may start to sell your hot sauce at a retail location. If your parking lot isn’t maintained properly and a customer is involved in an accident due to dangerous conditions, you could be sued for damages. With the help of general liability coverage, you can rest easy knowing that you are protected against common accidents, inside and outside of your building.
Example 3: Loading and unloading your product is always a risky process—just one false move and a whole batch of hot sauce could come crashing to the ground. But if you drop a pallet of hot sauce as you load it into a client's vehicle, you could be held responsible for damages to their personal property. While general liability insurance can't get back those wasted hot sauce production hours, it can help to pay for repairs.
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 hot sauce company in America spends between $500-$1,200 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 hot sauce companies should obtain:
Product Liability Insurance
Hot sauce is rising in popularity among foodies and daredevils across the country. And while most customers understand there is a risk involved in using your product, there is still a chance that you could be sued for certain damages that may be caused by the products you sell. Product liability coverage can work to protect your business if a customer decides to pursue a lawsuit related to damages caused by your hot sauce or other products.
Business Interruption Coverage
If there is a problem in your factory due to a fire, inclement weather, or even a burglary and you have to shut down production, this coverage can help to cover some of the losses your business may incur. This is a great coverage option for businesses both large and small to help prevent closing your doors for good after an interruption to your regular production schedule.
In addition to the policies outlined above, there are a few other types of coverage your hot sauce 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.
Home-Based Business Insurance
If you are running your hot sauce business out of your own home, there’s a good chance that your homeowners’ insurance policy won’t cover accidents that are related to any of your business activities. Luckily, by investing in this special home-based business insurance option, you can protect your home and your business in the event of a work-related accident.
Commercial Auto Insurance
Whether you have your very own fleet of delivery vehicles for your hot sauce or you plan on using personal employee vehicles to make deliveries, commercial auto insurance can help to cover damages if you or your team are found to be liable for damages in an auto accident. This coverage is especially important if you use personal vehicles for work-related duties because your personal auto insurance policy will not cover these types of accidents.
Commercial Umbrella Insurance
The hot sauce industry is on fire right now in the US, and businesses are at risk for increased liability judgments as they gain popularity. A commercial umbrella policy provides an extra layer of protection for your business in the event that your primary policy is exhausted.
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.