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.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A TEMP AGENCY
Example 1: A potential client is visiting your office to discuss his employment interests. While entering the restroom, he slips and falls, hitting his head on the floor and sustaining a concussion. He demands that your business pay for his medical treatment. Your general liability insurance would likely cover this cost.
Example 2: One of the temporary workers you represent decides to sue your business, claiming that you slandered her when speaking to a potential employer. While you are not sure what she is referring to, you know that you need to hire an attorney to protect your business. The general liability insurance policy you carry would pay for your attorney fees and the cost of a settlement if one was required.
Example 3: One of your employees trips and runs into a visitor, knocking her to the floor and breaking her arm. The injured visitor decides to sue your business. With general liability insurance, your legal fees are covered by your insurer.
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.
On average, temp agencies in America spend 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.
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 temp agencies should obtain:
Workers’ Compensation Insurance
As an employer, you are most likely required to carry workers’ compensation insurance by your state. The workers’ comp policy you purchase will pay for medical treatment if an employee is injured performing job-related duties. It would also pay for some of their lost wages if they are unable to work while recovering.
Professional Liability Insurance
Professional liability insurance is designed specifically for your business, so it will protect you from mistakes and errors made by you and/or your employees. If someone decides that your professional advice or representation caused them injury and sues your business, your professional liability insurance would pay for your legal defense. It would also pay for a settlement if you needed to settle the case out of court.
In addition to the policies outlined above, there are a few other types of coverage your temp agency 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.
Data Breach Insurance
In the digital age, there is always the possibility that your business could become the victim of cyber criminals. Data breach insurance protects you against damages caused by such events. For instance, if your client database was hacked and one or more clients sued you for damages, your data breach insurance policy would pay for your legal costs.
Commercial Umbrella Insurance
The general liability insurance policy you carry for your business will be adequate in most cases. However, there are circumstances where the limits of your general liability insurance could be exceeded—like if you lose a major lawsuit. Once the limits of your general liability insurance are reached, you are left paying the remaining damages. But if you have an umbrella policy, it will kick in when the general liability insurance stops paying.
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.