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 REMODELING COMPANY
Example 1: As you’re showing a customer the progress made on their remodeling project, they trip over some tools and fall, sustaining multiple injuries. General liability insurance would likely cover the cost of medical care.
Example 2: While preparing a quote to redo a building’s kitchen, one of your employees makes a disparaging remark about the original builder’s work. The comment gets back to the original builder, who files a defamation lawsuit. General liability insurance would likely cover the suit.
Example 3: A malfunctioning piece of equipment causes a fire, which spreads throughout the building your company is working on. General liability insurance would probably cover the property damage.
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 remodeling company 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 REMODELING 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 remodeling companies should obtain:
Commercial Property Insurance
Commercial property insurance will help cover the cost of damage to company-owned buildings, equipment and supplies caused by events like a fire or vandalism. Your remodeling company will need this coverage if it owns a showroom or office, and you’ll still want coverage for equipment even if your company doesn’t own a building.
The equipment that remodelers use is often specialized and expensive. Make sure your company’s property insurance protects against the full value of your company’s equipment.
Commercial property insurance comes as part of a business owner’s policy (BOP).
Professional Liability Insurance
Professionals who apply knowledge or skill in their work may be held responsible for any mistakes they make. Professional liability insurance usually covers lawsuits arising from errors in work.
When selecting professional liability policy, look for one that’s tailored to your company’s particular type of remodeling work. Policies frequently have specialized protections, and you’ll want the protections that are most relevant to your company’s work.
Professional liability insurance comes as part of package policies and on its own.
Workers’ Compensation Insurance
Your remodeling company will have to carry workers’ compensation insurance if it has employees. This insurance covers work-related injuries, which are common in the remodeling and construction industries. States generally require businesses that have employees to carry the coverage.
While your company must cover employees with workers compensation, independent contractors and subcontractors usually don’t legally have to be covered by your company’s policy.
TYPES OF COVERAGE SOME REMODELING COMPANIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your remodeling 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
When liability lawsuits are greater than the limits of underlying policies, commercial umbrella insurance provides additional protection. If you’re concerned about potentially expensive liability suits and claims, this insurance can provide robust protection at a highly affordable price.
Commercial umbrella insurance comes as part of package policies and on its own.
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.