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 RECORDING STUDIO
Example 1: During a recording session, an artist accidentally trips over some cables and falls, injuring herself. The injuries are significant enough to require a trip to a medical facility for treatment. A general liability insurance policy will likely cover the costs of treating her injuries.
Example 2: One of your employees is bringing a box of new recording components into the studio when he accidentally drops the box on the foot of a visitor, causing that visitor injury that requires medical care. The visitor decides to take legal action against your business. A general liability insurance policy would likely cover some of your legal costs, including the cost of damages should the court decide against you.
Example 3: Most recording studios do not think of their parking lots as areas of potential financial risk, but they can be if they are poorly maintained. If a visitor is injured in the parking lot due to poor maintenance and takes legal action against your business, your general liability insurance will pay the fees related to the accident.
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 recording studio in America spends 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 RECORDING STUDIOS 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 recording studios should obtain:
Data Breach Insurance
The work you produce with different artists often has significant value. Unfortunately, a data breach could result in the theft of that work and the loss of income for your clients. Should they decide to take legal action against you for the losses they sustain due to the data breach, your data breach insurance policy will likely help to cover some of those costs.
Commercial Property Insurance
Your recording equipment is probably the biggest investment you have made in your business. If something happens to your equipment, such as being damaged in the event of a fire or other disaster, you want to know that you can replace it as quickly as possible and get back to business. Commercial property insurance is designed to help you cover the costs of replacing equipment for your business and any products you sell.
TYPES OF COVERAGE SOME RECORDING STUDIOS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your recording studio 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.
Home-Based Business Insurance
If you are running your recording studio out of your home, it is possible that your homeowners’ insurance may not protect you against accidents related to your business. A home-based business insurance policy is a good way to add the coverage you need to protect your business from unexpected costs.
Workers' Compensation Insurance
If your studio employs anyone to help with the business, then the laws of your state most likely require you to carry workers’ compensation insurance. There are multiple benefits to getting a workers’ compensation insurance policy. You protect your business from legal repercussions by adhering to state law, and you also protect your company against the costs associated with employee injuries or illnesses. If they are hurt on the job, your insurance policy will likely cover the cost of treatment and lost wages.
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.