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 TOOL RENTAL COMPANY
Example 1: A customer is in your tool rental shop with his children. The little boy is playing with a sledgehammer when he drops it and breaks his sister’s foot. The customer decides to sue your business. Your general liability insurance will pay for your legal defense, including the cost of a settlement if necessary.
Example 2: One of your new employees attempts to load a mini skid loader into a trailer for a customer. He loses control and runs into the side of the customer’s truck. The general liability insurance you carry will pay for damage to customer property caused by you or your employees.
Example 3: A customer is rushing to the restroom when he slips and falls on the recently mopped floor. He breaks his wrist and asks that you pay for the medical treatment. Your general liability insurance will likely cover this expense.
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, tool rental businesses in America spend 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 tool rental businesses 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 tool rental businesses should obtain:
Product Liability Insurance
The products you offer your customers are relatively safe as long as they are used as directed. However, there is always a possibility that a customer will get hurt or claim to have been injured from one of your products. Product liability insurance will pay for your legal defense in such a situation.
Commercial Property Insurance
You have invested a lot in the tools and equipment that you offer for rent. If you were to lose that property in an unexpected event, like a fire, you might have trouble financially replacing everything. With a commercial property insurance policy, you can get help with replacement costs as long as the damage was caused by a covered event.
Types of Coverage Some tool rental businesses May Need
In addition to the policies outlined above, there are a few other types of coverage your tool rental 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.
Workers’ Compensation Insurance
If you have employees, there is a good chance that your state requires you to carry workers’ comp insurance. A workers’ comp policy provides coverage for medical expenses if an employee is injured performing job-related duties. They can also get help with lost wages if they cannot work while they recover.
Commercial Umbrella Insurance
The general liability insurance policy you carry is sufficient for most circumstances, but there is a possibility that its limits could be exceeded—like if you were to lose a major lawsuit. If your general liability insurance limits are exceeded, an umbrella policy would kick in where the general liability policy left off.
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.