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 SUB SHOP
Example 1: An employee is mopping the floor but forgets to place a “wet floor” sign over the area. An elderly customer slips and falls, breaking her tailbone. If you were found liable, general liability insurance would probably help cover some of the damages or any settlement reached between your business and the customer.
Example 2: Your employee permits a customer’s dog to enter the store, even though this is not allowed in restaurants. The dog escapes its owner and bites a small child, requiring medical care. If found liable, your business would probably be covered for some of the resulting damages or any settlement reached between you and the child’s guardians.
Example 3: A customer orders a sub without reading its description. He is allergic to one of the ingredients in the sandwich and has a severe reaction, cutting off his air supply due to rapid swelling. He survives but incurs substantial medical costs. If found liable, general liability insurance would likely cover some of what your business owes in damages or any settlement reached.
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 sub shop in America spends between $500-$1,200 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 SUB SHOPS 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 sub shops should obtain:
Commercial Property Insurance
From food ingredients to kitchenware, stoves, refrigerators, and more, a sub shop business has plenty to lose in the event of a catastrophe like fire or violent weather. Losses of equipment and inventory, or even the shop itself, could represent a serious setback for your business. Commercial property insurance provides coverage for losses of equipment, tools, inventory, and real estate in the event of the aforementioned disasters or other covered events.
Business Interruption Insurance
Together with commercial property insurance, this policy can make your business extremely resilient. Damages to commercial property from fires, tornadoes, and other destructive forces can leave your business out of commission for an unknown period of time.
Business interruption insurance exists to provide coverage for profit losses during this downtime. Sometimes, it even provides coverage for temporary relocation costs, allowing your business to get back on track while it reestablishes itself in the wake of a catastrophe.
TYPES OF COVERAGE SOME SUB SHOPS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your sub shop 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
Some sub shops don’t merely provide on-site services—they also deliver! If your business will be joining the food delivery movement, it will need commercial automobiles. Commercial auto insurance keeps your company’s delivery vehicles covered for accidents that take place while your drivers are out on the road.
Workers’ Compensation Insurance
If your sub shop employs part-time or full-time workers, most states will legally require you to carry workers’ compensation insurance. This type of policy covers expenses related to injuries or illnesses that employees suffer while on the job. It can also help employees cover lost wages for a period of time in which they are unable to work due to their injury.
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.