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 RECORD LABEL
Example 1: During an artist’s initial launch, your label promises a discount on their next release to anyone who pre-orders the first album. Because that album sells poorly, your label never releases a second one. If the people who pre-ordered the first album file a false advertising lawsuit, general liability insurance would cover your legal fees and any damages awarded in a settlement.
Example 2: An agent slips on a wet floor in your office and injures themselves. General liability insurance would cover the agent’s medical bills related to the accident.
Example 3: When an employee makes false claims about a competitor and several media outlets publish those statements, the competitor files a defamation lawsuit against your label. General liability insurance would cover your legal fees and any damages awarded in a settlement.
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, record labels in America spend between $300 - $600 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 record labels 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 record labels should obtain:
Product Liability Insurance
When you sell products to the public, there’s always a chance a customer may file a lawsuit if they believe one of your products caused significant harm—such as if a child suffers internal bleeding after ingesting pieces of a shattered CD. Product liability insurance would protect your business by covering your legal fees and any damages awarded in a settlement.
Professional Liability Insurance
Professional liability insurance covers work-related errors, including those associated with copyright infringement. If someone accuses your label of plagiarizing a previously published song, this coverage would pay for your legal fees as well as any damages awarded in a settlement.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability benefits stemming from a work-related accident.
For your performing employees, such as singers and musicians, make sure you understand how your policy covers voice, hearing and repetitive-motion issues they may suffer as coverage often depends on the performer’s relationship to your company and how the issues develop.
Commercial Property Insurance
If your record label owns an office or recording studio, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your recording equipment, computers, and other business property after an accident so you can recover quickly.
Types of Coverage Some record labels May Need
In addition to the policies outlined above, there are a few other types of coverage your record label 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
While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they exceed the limits of your primary coverage—such as a copyright infringement claim on one of your most successful albums. Commercial umbrella insurance protects you from paying out-of-pocket for any 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) 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.