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 REAL ESTATE COMPANY
Example 1: During an open house event you host in a home with an extensive collection of antiques, you accidentally knock an expensive figurine off a shelf and it breaks. General liability insurance would cover the replacement cost of the figurine.
Example 2: While you show a potential buyer around a house, he slips on a cord you failed to cover, breaks an arm, and decides to sue. General liability insurance would cover the potential buyer’s medical bills, your legal fees, and any damages awarded by a court.
Example 3: While conducting a walkthrough of a home after a showing, you fail to turn off the bathroom fan. After you leave, the fan motor overheats and ignites a fire that damages half the home. General liability insurance would cover the cost to repair or replace the damaged home.
Example 4: You want to partner with a large franchise company that requires evidence of general liability insurance. Having this coverage would help fulfill your eligibility requirements.
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, real estate companies 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.
How much will the right insurance cost you?
Find what business insurance will cost for your business right now
Other Types Of Coverage Real Estate Companies 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 real estate companies should obtain:
Professional Liability Insurance
Because most real estate transactions involve large sums of money, professional liability insurance is essential. This coverage, also known as “errors and omissions” insurance, protects you when a client sues because they are unhappy with their transaction, claiming your professional advice and representation is at fault.
Commercial Auto Insurance
If you use a personal car for business activities, your personal auto policy may not cover losses from a work-related accident. State law mandates minimum levels of commercial auto coverage to protect both you and others on the road in the event of an accident. While each state requires a certain level of insurance for vehicles on public roads, the minimum requirement only offers basic protection. As such, consider purchasing limits greater than those required by state law.
You can purchase commercial auto insurance as a standalone policy or as part of a business owners’ policy (BOP).
Commercial Property Insurance
As a real estate agent, you know how expensive it can be to repair or replace a damaged building. If you own the building in which you operate, you need commercial property insurance to cover your building and the business property stored there in the event of a fire, burglary, or natural disaster.
You can typically purchase this coverage as part of a business owner’s policy (BOP).
Types Of Coverage Some Real Estate Companies May Need
In addition to the policies outlined above, there are a few other types of coverage your real estate company 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
For many of your clients, real estate transactions are expensive and emotional. As a result, you face greater liability exposure than other businesses. While your general liability policy covers most claims, some lawsuits may be so expensive that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for legal fees and awarded damages that exceed your primary policy.
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) or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Streamline your business’ internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
Steps After Getting Business Insurance
Depending on where you are in your business building process, here are some other actions you may need to take before getting started:
- If you’re just starting, finding the best name for your business is a great first step. Check out TRUiC’s Business Name Generator.
- After finding the perfect name, get a logo with our Logo Generator.
- Every business needs a website. Using a website builder like the GoDaddy Website Builder or Wix makes building a website simple and fast! Check out our review of the Best Website Builder.
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.