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 PHARMACY
Example 1: One of your pharmacy employees is stocking shelves when she rounds an aisle and runs into a customer. The customer falls and breaks her wrist. She asks that your business pay for her medical care. Your general liability insurance policy would likely cover the cost of her treatment.
Example 2: A pharmacy customer is going through the drive-through. He reaches his hand into the drawer to pick up his prescription and it gets stuck. In his panicked efforts to pull his hand out, he breaks several of his fingers. He decides to sue your business. Your general liability insurance would pay for your legal costs, including the cost of a settlement if necessary.
Example 3: One of the competing pharmacies in town has sent you a letter telling you that they are suing you for libel. While you are not certain why they have determined that you libeled their business, you still need to protect yourself by getting an attorney. Your general liability insurance would pay for your legal defense, including the cost of an attorney and the cost of a settlement if you settle 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
The average pharmacy in America spends between $350 - $750 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 PHARMACIES 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 pharmacies should obtain:
Workers’ Compensation Insurance
The employees you hire to help you run your pharmacy business need the protection offered by workers’ comp insurance, as does your company. Workers’ comp ensures that you meet the legal requirements for employers in your state and covers the cost of medical care if an employee is injured performing work-related duties. The policy will also pay for lost wages if an injured employee needs to take time off of work to recovery.
Product Liability Insurance
You do your best to help your customers by providing them safe, effective products. But there is always the possibility that one of them could be hurt by a product you sell and then sue your business. Product liability insurance will protect your company by covering your legal fees as well as the cost of paying a settlement if you need to do so.
TYPES OF COVERAGE SOME PHARMACIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your pharmacy 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 Property Insurance
The cost of replacing your commercial property, such as your entire pharmacy inventory, would be considerable if you were to lose it in a fire or other unexpected event. With commercial property insurance, your insurer would help to pay for replacement costs if your property was lost in a covered event. That way you could get new inventory and equipment and get back to serving your customers as soon as possible.
Professional Liability Insurance
As a professional giving advice, it is important that you protect yourself and your business with professional liability insurance. This insurance protects you in the event of errors or other mistakes. For example, if you give advice about a medication and they get hurt or ill and then sue your company, your policy would pay for your legal fees to defend yourself.
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.