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.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A THEATRE COMPANY
Example 1: While on tour, one of your actors causes extensive damage to a host theatre’s dressing room. They are suing for $56,000 in damages to replace and repair damaged property. General liability insurance would cover related costs and legal representation in court.
Example 2: The cleaning crew uses the wrong cleaner on the floors, causing a patron to fall. The patron is requesting reimbursement for medical bills, totaling $24,000. General liability insurance would cover the cost of their medical expenses.
Example 3: You tweet that a theatre you’ve partnered with is difficult to work with. They have named your company in a lawsuit, citing defamation. Your general liability policy would cover your legal fees and any damages awarded in the suit.
Example 4: As part of an expansion project, you are seeking a bank loan. Your general liability policy would help fulfill the bank loan requirement of at least $1 million in liability insurance.
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
On average, theatre companies in America spend between $500 - $1,100 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 theatre companies 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 theatre companies should obtain:
Commercial Property Insurance
Owning and managing a theatre requires investment in a great deal of expensive equipment. To protect these investments, a commercial property policy is recommended. This policy provides coverage for your owned real estate and its contents, should a covered loss occur. Business owners should discuss their business model and financial responsibilities with an insurance agent to properly protect their business investments.
Workers’ Compensation Insurance
Workers’ compensation provides coverage for medical bills and lost wages if an employee is injured or falls ill while on the job. If a lawsuit occurs as a result of this injury, the policy would also cover related legal fees. While the requirements vary from state to state, all business owners are required to carry workers’ compensation insurance if they hire employees.
Commercial Auto Insurance
Whether your theatre group travels regularly or works out of one owned theatre, your team likely spends a great deal of time driving for business purposes. If you or one of your employees is involved in an accident, any loss would be excluded under a personal auto policy. To ensure no gap in coverage, a commercial auto policy is recommended. While each state mandates the minimum coverage limits required, those limits typically leave business owners underinsured. Your insurance agent can assist you in determining what coverage limits best meet your professional and personal needs, should a major incident occur.
Types of Coverage Some theatre companies May Need
In addition to the policies outlined above, there are a few other types of coverage your theatre company 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.
Inland Marine Insurance
Business-owned tools and equipment taken off-site have limited coverage under a commercial property insurance policy, leaving many owners grossly underinsured. If your theatre travels, an inland marine policy may be necessary to fill those coverage gaps and protect your property when you’re on the road.
Business Interruption insurance
Your business faces a significant loss in revenue if it is shut down after a loss. Business interruption insurance, also known as business income and extra expense insurance, helps protect the business financially if you need to stop operating for a period of time. It would provide coverage for extra expenses, supplement lost income, and help get your theatre set up in a temporary location while the property is being repaired.
Commercial Umbrella Liability Insurance
In this industry, you rely on the patronage of thousands of customers each year. Because this puts you at greater risk for liability claims, your insurance agent may recommend a commercial umbrella policy. Once the underlying limits of your general liability policy have been exhausted, this policy would provide additional coverage, helping secure the theatre’s financial future.
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.