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 RESALE BUSINESS
Example 1: A potential client comes to your place of business. During the visit, one of your employees accidentally knocks the woman over with a dolly stacked with boxes. She falls and breaks her elbow. Your general liability insurance policy would likely cover the costs of her medical treatment.
Example 2: You hire a marketing firm to help with a new advertising campaign. Although the response is positive, you also get an email from a competitor. He is suing you for damaging his business with your advertising. Your general liability insurance policy will pay for your legal fees, including a settlement if necessary.
Example 3: You are delivering a table to a buyer when your employee stumbles and crashes into the china cabinet of the homeowner. Your general liability insurance policy would likely cover the cost of replacing the property of your customer.
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.
The average resale business in America spends between $400-$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.
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 resale businesses should obtain:
Product Liability Insurance
As a seller of products, it is important to protect yourself from liability related to those products. Product liability insurance will provide protection. Should a customer try to hold you responsible for damage or injury caused by a product you sold, your insurance will pay for your legal fees and any settlements if they are required.
Commercial Property Insurance
All of the products you purchase for resale took an investment on your part to acquire. If they were lost due to an unexpected event, like a fire, it would be expensive to replace them. Commercial property insurance helps you pay to replace your commercial property after a covered event like a fire or a storm.
In addition to the policies outlined above, there are a few other types of coverage your resale 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.
Commercial Auto Insurance
If you have one or more vehicles that you use primarily for business, commercial auto insurance will provide the coverage required by law in your state. If you or an employee are involved in an accident, the insurance policy will help pay for the cost of repairing or replacing the vehicle. It will also help pay for medical treatment for those injured in the accident.
Workers’ Compensation Insurance
If you are an employer, your state most likely requires you to carry workers’ comp insurance. Your policy will pay for medical treatment for employees who are injured while doing work-related tasks. It will also help to pay lost wages for injured employees while they are unable to work.
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.
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.