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 SOAP MAKING BUSINESS
Example 1: A customer visits your business to pick up their order and trips over your front steps. They want you to pay for their medical bills. A general liability insurance policy will cover the expenses related to the injury and any expenses related to lawsuits, including settlements, court costs, and attorney's fees.
Example 2: A customer claims that a certain soap product advertised as being able to heal dry skin or eczema did not heal their excessively dry skin. They sue you for false advertising. In this instance, your general liability insurance would pay for your attorney's fees and any payouts awarded by the judge.
Example 3: A rival soap making business files a lawsuit stating that you harmed their business with your verbal or written words. Your general liability insurance should cover the expenses related to the lawsuit, including attorney fees and any settlements or judgment awards.
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 soap making 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.
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Other Types Of Coverage Soap Making Businesses 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 soap making businesses should obtain:
Commercial Property Insurance
Even if your soap making businesses is inside your home, you may still need commercial property insurance to specifically protect your soap making equipment and supplies from unforeseen damage, like from a weather event or fire.
Commercial Auto Insurance
If you deliver products to stores and customer homes via a vehicle, even if you also use that vehicle as your personal transportation, you will need commercial auto insurance. This is because many individual car insurance policies do not cover accidents caused while driving for work or for hire.
Product Liability Insurance
Product liability insurance protects you in the event that someone becomes injured by your handcrafted products. This includes medical expenses incurred if your products cause an allergic reaction, burn, or another injury.
Types Of Coverage Some Soap Making Businesses May Need
In addition to the policies outlined above, there are a few other types of coverage your soap making 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.
Cyber Liability Insurance
If your soap making business has a website that contains customer information and/or payment methods, you will need cyber liability insurance in order to protect you against lawsuits that are the result of your website getting hacked.
Workers’ Compensation Insurance
Workers’ compensation insurance is needed if you employ other individuals to help you manufacture and/or sell your soap on your property. This insurance pays for medical bills and other expenses that are caused by on-the-job injuries.
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.