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 PAWN SHOP
Example 1: While you’re helping a customer, they go to reach for a record player on a high shelf. Unfortunately, the shelf wasn’t secured properly, and it comes crashing down on their head, resulting in serious injuries. Your general liability insurance policy will likely cover their medical bills and any related legal fees.
Example 2: A customer is browsing in your TV section and trips over an extension cord, falling and breaking their wrist. The customer is very upset and threatens to take you to court. General liability insurance will likely pay for their medical costs, your legal fees, and any payouts in a settlement.
Example 3: You decide to revamp your logo. You change your external signs, take out a new advertisement in the classifieds, and pay for a commercial on local TV. Your lawyer gets a call a few days later from one of your competitors accusing your pawn shop of stealing their logo design. General liability will likely cover your legal expenses and any payouts if you decide to settle the case out of 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, pawn shops in America spend between $400 - $700 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 pawn shops 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 pawn shops should obtain:
Commercial Property Insurance
Commercial property insurance will help cover the cost of repairing or replacing owned real estate, equipment, and inventory that is damaged or lost in a covered event such as a fire or burglary.
Business Interruption Insurance
If there is a fire or other accident that causes you to close your doors for an extended period of time, you could be left trying to cover various expenses out of your own pocket. To help avoid this issue, business interruption insurance works to cover some of your lost revenue until you’re ready to open your doors again.
Workers’ Compensation Insurance
This is state-required insurance coverage for most businesses with part-time and full-time workers. If one of your employees becomes injured on the job or falls seriously ill following a work-related accident, worker’s compensation can help to pay for their medical bills. Additionally, if their injuries are so severe that they are unable to return to work, they may be eligible to receive disability benefits.
Types of Coverage Some pawn shops May Need
In addition to the policies outlined above, there are a few other types of coverage your pawn shop 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
If your company is involved in an expensive lawsuit or an accident that exhausts your primary insurance policy limits, you may end up having to cover the remaining costs on your own. To avoid this potentially financially devastating problem, commercial umbrella insurance will go beyond your primary policy limits to provide an additional layer of protection.
Data Breach Insurance
To keep track of the loans you currently offer and which merchandise is ready to be returned to your customers, it’s important to keep a clear database on your pawn shop’s computer system. If your system is hacked by cyber attackers, the security of your customer’s personal information could be compromised. With data breach coverage, you can protect your business from potential related lawsuits.
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.