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 MICROBREWERY
Example 1: You are taking a group on a tour of your brewery when one person wanders off. She slips and falls, breaking her hip. She demands that your business pays for her medical treatment. The general liability insurance policy that you carry will likely cover this expense.
Example 2: A competing brewery is upset with your new marketing campaign, claiming that your business has libeled them. They file a lawsuit against your company. Your general liability insurance will cover the cost of your legal fees and any potential settlement costs.
Example 3: One of your employees is bringing a stack of bottles up to the front when he accidentally knocks over a customer. The man falls backward, hitting his head on the floor and sustaining a concussion. He files a lawsuit against your business. The general liability insurance policy you have will pay for your legal defense, including the cost of a settlement if one is necessary.
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 microbrewery 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.
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OTHER TYPES OF COVERAGE MICROBREWERIES 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 microbreweries should obtain:
Workers’ Compensation Insurance
Most states require businesses that have employees to carry workers’ compensation insurance. If an employee is injured performing work-related activities, your policy will pay for their medical treatment. It will also cover some of the lost wages for the employee if they are unable to work while recovering.
Product Liability Insurance
You strive to ensure that your customers enjoy your products responsibly, but you cannot be certain that they will do so. Product liability insurance is designed to protect your business from liability caused by your products. For example, if a customer claims that your beer caused him or her injury or illness and files a lawsuit, your policy will pay for your legal defense fees. It will also pay for a settlement if one is required.
Commercial Property Insurance
The equipment and supplies you have accumulated to operate your microbrewery were expensive, and they would be costly to replace if you were to lose them in an unexpected event like a fire. But if you have commercial property insurance, you can file a claim with your insurer and get financial help with replacement costs as long as your loss was caused by a covered event.
TYPES OF COVERAGE SOME MICROBREWERIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your microbrewery 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 Umbrella Insurance
An umbrella policy is designed to protect your business when your general liability insurance limits are exceeded—like if you lose a major lawsuit. If the limits of your general liability insurance are exceeded, the umbrella policy will kick in and pay until its limits are reached. That way, you can avoid having to pay the remaining damages out of pocket.
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.