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 TINY HOUSE BUILDER
Example 1: A structure you are building collapses on the customer, who has wandered onto the site before the project is complete. If held liable, general liability insurance could likely help cover ensuing medical costs or a settlement between your business and the customer.
Example 2: A dog wrenches free from its owner’s grip and sprints into the path of a moving work truck, suffering severe and permanent injuries. General liability insurance would likely cover some of what your business owes in damages, or any settlement reached.
Example 3: One of your employees is on a smoke break in a dry, wooded area during the summer. He disposes of the still-lit cigarette butt, which catches fire and destroys several acres of forest. If held liable, your business would probably have some coverage under a general liability insurance policy for damages incurred or a settlement reached outside of court.
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 tiny house builder in America spends between $500-$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 Tiny House Builders 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 tiny house builders should obtain:
Professional Liability Insurance
In the event that your product comes out unstable or otherwise unsatisfactory, you can find your business confronted with a suit alleging professional negligence. Instead of paying damages out of your business’s profits, a professional liability policy can cover a good chunk of whatever figure you end up having to pay.
Commercial Property Insurance
If unexpected disasters like a fire or violent weather manage to destroy or significantly damage your commercial property, it can spell serious trouble for your business, which will be unable to function without its tools of the trade. Commercial property policies protect your material assets, including any owned real estate, from damages incurred by covered events.
Commercial Auto Insurance
Any vehicle utilized for business purposes must be covered by auto insurance. The simplest solution is commercial auto insurance, which will provide your business coverage in the event of automotive accidents.
Workers’ Compensation Insurance
Workers’ compensation insurance is legally mandated in most states for any company with full-time or part-time workers employees.
This policy will help to cover accidents on the job resulting in employee injury or death. As such, it includes packages for both disability and death benefits. This isn’t merely a legal mandate -- it is an important way to show your workers and their families that you have their best interests in mind.
Types Of Coverage Some Tiny House Builders May Need
In addition to the policies outlined above, there are a few other types of coverage your tiny house builder 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.
Business Interruption Insurance
With commercial property covered for certain serious natural disasters, there is still the matter of what to do in the wake of these unfortunate events. Business interruption insurance addresses the problem of profit loss during intervening periods of repair and relocation, even helping to cover the costs of establishing the business at a temporary location.
For tiny house builders, this can be an especially helpful policy, as it can provide additional coverage for the training of new employees on complex machinery like construction vehicles.
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.