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 VIDEO GAME COMPANY
Example 1: While visiting company offices, a consultant slips on a recently mopped floor. The consultant suffers multiple injuries, including a head injury. General liability insurance would cover medical care needed after a slip-and-fall accident on company property like this.
Example 2: An employee inserts a secret easter egg into one of your company’s games. The easter egg references another developer’s game and is meant in good fun, but the other developer takes issue and files a copyright infringement lawsuit. General liability insurance may cover costs associated with the suit.
Example 3: In order to boost sales during an initial game release, your company promises a discount on the game’s future sequel to customers who pre-order the first game. The sequel never comes to fruition, and customers sue for false advertising because they can never use the discount. General liability insurance would probably cover the resulting legal fees and settlements.
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 video game company in America spends between $450-$750 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 VIDEO GAME 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 video game companies should obtain:
Product Liability Insurance
Since your video game company makes money by selling products, product liability insurance is one coverage your business likely should have. This insurance helps protect businesses from lawsuits related to damage or injury that their products cause.
The product-related liability risks for video game companies aren’t clear at this point, but there are a few risks that the industry one day might face. For example, customers might successfully sue by claiming that a video game was too distracting and caused them to get hurt in an accident. Having product liability insurance in place now may help protect your business from uncertain risks like this.
Product liability insurance is available through a business owner’s policy (BOP).
TYPES OF COVERAGE SOME VIDEO GAME COMPANIES MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your video game 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.
Professional Liability Insurance
If your video game company provides consulting services to other game developers, you may want professional liability insurance for yourself and all consulting employees. This insurance usually covers mistakes made when giving advice in a professional capacity.
Professional liability insurance is available as a standalone coverage and through package policies.
Commercial Property Insurance
Any studio or building that your video game company owns should be covered by commercial property insurance. This insurance can often insure both structures and equipment kept in them. Make sure the limits adequately cover your company's computers.
Commercial property insurance is often available through a BOP.
Workers’ Compensation Insurance
If your video game company has employees, the business is probably required by state law to carry workers’ compensation insurance. Workers’ compensation protects against costs related to on-the-job injuries.
Among the injuries that it normally protects against is carpal tunnel syndrome. To make sure workers who develop this because of typing too much at work are covered, workers’ compensation should be in place the day your business hires its first employee.
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.