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 PARTY RENTAL BUSINESS
Example 1: An obese adult who’s over the weight limit tries to use an inflatable slide, falling from the top and fracturing their wrist. While the lawsuit they filed against your company is settled in your company’s favor because there are warnings against such use, the suit results in substantial legal fees. General liability insurance would probably cover those fees.
Example 2: While picking up party supplies at your company’s warehouse, a customer trips over a ball on the floor. They fall on the concrete floor and sustain a concussion. General liability insurance would likely cover medical expenses related to the incident.
Example 3: Most major venues will only rent equipment from a party rental business that has general liability insurance.
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 party rental business in America spends between $500-$1,100 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 PARTY RENTAL BUSINESSES 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 party rental businesses should obtain:
Commercial Property Insurance
Party rental businesses need commercial property insurance both for any building they own and for the equipment that they rent out. Commercial property policies can be adapted to insure either or both types of property. Commercial property insurance is widely available through business owner’s policies (BOPs).
Commercial Auto Insurance
Many party rental businesses bring rental equipment to and from customer locations using company vehicles. Any vehicles that are used for this purpose need to be insured with commercial auto insurance. Commercial auto insurance is available by itself or as part of a package policy.
Commercial Umbrella Insurance
Commercial umbrella insurance provides a secondary level of liability protection for especially expensive claims. Once underlying policies’ limits are reached, this insurance may offer additional protection. The extra protection that commercial umbrella insurance affords is especially important when renting party equipment. Accidents involving certain rented equipment can result in catastrophic injury or even death, and the lawsuits resulting from such accidents are often costly. This insurance offers an affordable way to protect your business against potential lawsuits like these.
Commercial umbrella insurance is available as a standalone policy or as part of a package policy.
TYPES OF COVERAGE SOME PARTY RENTAL BUSINESSES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your party rental business 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
Recovering from a disaster or other incident can be a lengthy process, and revenue may drop during that process. Business interruption insurance provides supplemental income for businesses during covered disaster recoveries. If your party rental business doesn’t have substantial cash reserves, this coverage could help the business survive a prolonged disaster recovery.
Business interruption insurance is available through BOPs
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.