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 STOCK BROKERAGE FIRM
Example 1: As a client sits down to discuss financial goals and investment plans, the base of the chair breaks, sending them onto the floor. A quick assessment determines that they need medical attention for their injuries. Your general liability insurance policy may help pay expenses that are related to the injury or any lawsuits that arise.
Example 2: In an effort to be hospitable and make your client feel comfortable, you retrieve them a hot beverage from the employee break room. The client burns his or her mouth on the overly hot drink and drops it into their lap, causing first and second-degree burns that require medical attention. Your general liability insurance policy may help cover the costs associated with treating the burn any lawsuits arising from the accidental injury.
Example 3: A client walking into your building on a rainy day slips and falls, hitting their head on your concrete floor. This injury requires immediate medical attention. Your general liability policy may pay the costs associated with any medical transport and treatment as well any costs associated with a lawsuit due to the slip and fall.
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 stock brokerage firm in America spends between $400-$700 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.
OTHER TYPES OF COVERAGE STOCK BROKERAGE FIRMS 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 stock brokerage firms should obtain:
Professional Liability Insurance
If you or one of your stock brokers makes a professional mistake or gives advice that costs your client money, they could take legal action. Professional liability insurance may help pay the costs associated with the lawsuit.
Commercial Property Insurance
If your brokerage firm is housed in a commercial building, you will want to purchase a property insurance policy in order to protect your building and your physical property in the event of a fire, covered weather event, or vandalism.
Data Breach Insurance
If your client’s personal information or financial information is stolen by hackers, cyber liability insurance will help you pay the costs of any resulting lawsuits.
TYPES OF COVERAGE SOME STOCK BROKERAGE FIRMS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your stock brokerage firms 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.
Workers’ Compensation Insurance
If you have employees working for your brokerage firm, you’ll need to have a workers’ compensation insurance policy in place to handle any injuries that happen to them while they are working.
Employee Theft Insurance
If one of your employees steals from the business or from a client account, employee theft insurance may help cover certain costs associated with the theft.
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.