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.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A JUNKYARD
Example 1: While looking for a particular car part, a customer cuts his arm on a protruding engine part, requiring a trip to the hospital and potential surgery. Your general liability policy should cover his medical bills.
Example 2: Your marketing campaign includes a billboard and a new slogan. Another local business names you in a lawsuit and claims they have lost business because your slogan closely resembles theirs. General liability insurance should cover the cost of legal representation and damages, should they win the court case.
Example 3: You are hoping to expand the business by purchasing the land next door. As part of the loan agreement, the bank is requiring evidence of liability insurance. General liability insurance should fulfill that obligation.
Example 4: A thief jumps the fence around your property and your guard dog bites him. The thief is suing your business for his medical bills and pain and suffering. General liability insurance should cover the medical bills and potential damages awarded by the court.
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
On average, junkyards in America spend between $450 - $1,000 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.
Other Types of Coverage junkyards 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 junkyards should obtain:
Commercial Property Insurance
Junkyards need a sizable amount of property to operate. Commercial property insurance will cover your business's real estate and property for perils like fire and weather.
This policy is generally included as part of a business owner’s policy (BOP). You can tailor this policy to your specific business insurance needs, whether you are a renter or building owner.
Workers Compensation Insurance
The state requires business owners to carry workers compensation insurance on all employees. If an employee injures themselves or falls ill doing work-related activities, the policy would cover their medical bills and a percentage of wages lost while out of work. It also protects the employer against lawsuits, offering legal representation if an employee sues.
Workers compensation is often purchased as a standalone policy.
Types of Coverage Some junkyards May Need
In addition to the policies outlined above, there are a few other types of coverage your junkyard 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
Many junkyard owners live on the property they run their business out of. Since homeowners insurance does not include business property and losses, it is important to purchase the proper coverage. Check with a homeowners insurance company to see if an extension of coverage for an additional premium is available. If not, you can purchase home-based business insurance as part of a business owners policy (BOP).
Commercial Umbrella Liability Insurance
Being a junkyard owner exposes you to a number of liability risks out of your control. While a general liability policy will protect you when a liability claim arises, fees associated with a lawsuit can add up. If you exhaust your underlying general liability limits, a commercial umbrella policy would take over. This policy helps with paying additional legal fees and court-awarded damages.
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.