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 PLUMBING BUSINESS
Example 1: One of your plumbers is working in a customer's home. He accidentally causes a pipe to leak onto a staircase. To fix it, he heads outside to his vehicle to retrieve a specific type of wrench. The customer walks down the steps while the pipe continues leaking and slips on the staircase, sustaining a broken ankle and a concussion on the way down to the bottom. If your company is found liable, general liability insurance could probably cover some of the damages as ordered by the court or agreed upon in a settlement.
Example 2: While working beneath a sink, one of your plumbers ends up damaging the food disposal unit. After the plumber leaves, the homeowner loses their wedding ring in the drain. As they reach in, the broken disposal triggers and badly damages the homeowner’s hand. General liability insurance would probably help to cover court-ordered payments or any settlement reached in the event your business is found liable.
Example 3: A plumber fails to correctly repair a leaky pipe, fixing the problem for only a day. The leak resumes worse than before, dripping steadily for many hours onto a hardwood floor. The flooring is badly damaged by the excess water and requires a complete replacement. General liability insurance would probably serve to cover some of the cost if found liable in court, or if a settlement were reached.
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 plumbing business in America spends between $500 - $1,500 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 PLUMBING 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 plumbing businesses should obtain:
Commercial Property Insurance
Plumbing companies need plenty of equipment as well as somewhere to store it. If these assets are damaged, it can be disastrous for your business. A wise business owner will acquire a good commercial property policy to protect his or her valuable tools, vehicles, machinery, storage facilities, and other physical items. Commercial property insurance covers damages to owned real estate and company equipment due to disasters like fire and extreme weather.
Commercial Auto Insurance
Reliable trucks or vans can be incredibly beneficial for a plumbing company to own. Hauling lots of heavy tools and equipment to customers’ homes is a normal part of the plumbing business, meaning that if you invest in a commercial vehicle for you or your employees, you may need this policy. Commercial auto insurance covers vehicular damages to your company vehicles, whether they are driven by you personally or by your workers.
TYPES OF COVERAGE SOME PLUMBING BUSINESSES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your plumbing 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.
Workers’ Compensation Insurance
Most plumbing companies hire a number of plumbers in order to meet the daily demands of local houses and their water systems. Plumbers hired full-time or part-time by your company will need to be covered by a workers’ compensation policy. This insurance keeps them covered in the event of on-site accidents and provides various benefits that result from damages suffered by your workers while on the job.
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.