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 LEMONADE STAND
Example 1: While purchasing a lemonade at your mobile stand, a customer trips over your stand and sustains injuries. General liability insurance could cover his/her medical bills.
Example 2: You want to sell your lemonade at a mall kiosk. The mall owner requires evidence of liability insurance as part of the lease agreement. A general liability policy should help fulfill this requirement.
Example 3: While moving your stand, the wheel falls off and causes a large gash in the paved parking lot. General liability insurance should cover the repair costs.
Example 4: A customer returns their purchased lemonade, claiming they found a piece of plastic in their drink. They name you in a lawsuit. Your general liability insurance should cover your legal costs and 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, lemonade stands in America spend between $300 - $800 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 lemonade stands 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 lemonade stands should obtain:
Home-Based Business Insurance
To save on overhead expenses, many small businesses operate out of their home. However, most homeowners policies exclude business property and losses. This can leave businesses uninsured or under-insured when a property damage loss occurs. Business owners can check with their homeowners insurance carrier to determine 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 owner's policy (BOP).
Product Liability Insurance
Without product liability insurance covers claims that arise from the manufacturing, distribution, and sale of your products. Customers who claim negligence on your part, regardless of merit, can sue you in a court of law. This coverage provides legal representation and pays damages awarded by the court.
Coverage is generally sold as part of a business owner's policy (BOP), which you can tailor to the unique needs of your business.
Types of Coverage Some lemonade stands May Need
In addition to the policies outlined above, there are a few other types of coverage your lemonade stand 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.
Business Interruption Insurance
Unfortunately, businesses often sustain commercial property losses that take months to recover from. To safeguard against financial devastation, many entrepreneurs choose to purchase business interruption insurance. This policy can help cover the costs of setting up at a temporary location, help with extra expense costs, and supplement lost income during recovery time.
This insurance is generally offered as part of a business owners’ policy (BOP) package.
Commercial Auto Insurance
While personal auto policies exclude vehicles used for business purposes, the state mandates that a policy must be in place. To meet the state-mandated requirements, your business should purchase commercial auto insurance. This policy pays to repair or replace damaged owned autos, liability claims, lost equipment, and medical expenses.
Commercial auto insurance is generally purchased as a standalone policy. Some carriers can also write it as part of a business owner’s policy (BOP).
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.