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 WEB DEVELOPMENT BUSINESS
Example 1: A client brings some documents into the office and fails to notice the cables strung across the floor. He trips on them and falls, injuring himself and requiring medical attention. The fees for his medical treatment will be covered by your general liability insurance policy.
Example 2: One of your competitors determines that your new logo, which you have been using on all your latest marketing materials, is too similar to theirs. The competitor files a lawsuit against your company, demanding damages for copyright infringement. Your general liability insurance policy will pay for your legal defense as well as for a settlement if the case is decided out of court.
Example 3: One of your team members visits a client’s office for some hands-on guidance on how to maintain their website. While there, your employee knocks over a cup of coffee onto an expensive laptop, causing extensive damage. The general liability insurance policy you carry will pay for the replacement cost of the client’s equipment.
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.
The average web development business in America spends 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 web development businesses should obtain:
Commercial Property Insurance
Your web development work requires functional, current tech—which is costly to buy and costly to replace. If your computer equipment and other office equipment is damaged in an unexpected event, like a fire, a commercial property insurance policy would pay for the replacement of the equipment and other supplies. With your equipment replaced, you can quickly get back to serving clients and generating revenue.
Data Breach Insurance
The clients you work with entrust you with a lot of important information. Should that information become compromised by cybercriminals, the damage to the client can be considerable. Should the client take legal action due to the stolen user data, your data breach insurance will cover your legal fees. It will also cover the cost of paying a settlement if your case is settled out of court.
In addition to the policies outlined above, there are a few other types of coverage your web development business 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 your web development business has employees, workers’ compensation insurance will ensure that you are able to cover the costs of their medical care if they are injured while performing job-related activities. It also provides some coverage for lost wages if the employee is unable to work due to the injury. Workers’ compensation insurance coverage is required by most states for companies have part-time or full-time employees.
Home-Based Business Insurance
If you run your web development business out of your home, it is possible that your homeowner’s insurance will not cover accidents due to business-related activities. It is important to speak to the insurance provider of your homeowner’s policy to verify what kind of coverage you have related to your business. If your homeowner’s policy does not cover you, then you can get a home-based business insurance policy as part of a business owner’s policy or possibly as an extension to your existing homeowner’s policy.
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.