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 WELDER
Example 1: Poor ventilation causes fumes to build up at a job site, and those fumes are ignited by a spark. Although relatively small, the explosion causes substantial property damage and some injuries. General liability insurance would probably cover legal expenses associated with the incident.
Example 2: While welding in a customer-owned building, equipment malfunctions and causes a fire. The fire spreads throughout the building, damaging a large portion of the structure. General liability insurance would probably cover the property damage.
Example 3: A customer drops off items that need to be welded at your company’s facility. On their way out, the customer trips over a hose on the ground and falls. General liability insurance would likely cover any resulting serious injuries.
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 welder 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 Welders 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 welders should obtain:
Professional Liability Insurance
Businesses that employ skilled workers may be held financially responsible for any errors their employees make while working. Professional liability insurance helps protect against errors in work, and it’s widely available for different types of professions.
Welding is potentially dangerous work, and an error can lead to substantial property damage, severe injuries, and (in some cases) even death. Make sure your business’s professional liability coverage has high enough limits to provide protection in even the worst scenarios.
Professional liability insurance can be purchased through a package policy or by itself.
Commercial Property Insurance
Most welders need commercial property insurance for the physical assets their business owns. This insurance can cover both buildings and equipment (as well as supplies and inventory).
Welding equipment often costs thousands of dollars, and many businesses in the field have several different welders. Check the terms and limits of your business’s commercial property insurance to make sure it fully insures your welding equipment.
Commercial property insurance can be purchased through a business owner’s policy (BOP).
Types Of Coverage Some Welders May Need
In addition to the policies outlined above, there are a few other types of coverage your welding 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.
Commercial Auto Insurance
If your business has a vehicle that’s used to offer welding services at customers’ locations, that vehicle needs to be insured with commercial auto insurance. State law generally requires all commercial vehicles that are driven on public roads to be insured.
Commercial auto insurance can be purchased through a package policy or by itself.
Workers' Compensation Insurance
If your business has employees, it is required by state law to carry workers’ compensation insurance. This insurance protects against work-related illnesses and injuries.
Even welders who are self-employed and don’t hire other workers may want workers’ compensation insurance. Health insurance sometimes won’t cover work-related injuries, but workers’ compensation can fill in this potential gap.
Commercial Umbrella Insurance
Welding-caused fires and explosions can quickly cause a lot of property damage, which can lead to expensive and lengthy lawsuits. Commercial umbrella insurance affords extra liability protection in the event that lawsuits exceed primary policies’ limits.
Commercial umbrella insurance can be purchased through a package policy or by itself.
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.