There are many aspects of opening a retail store that are exciting, but most business owners can agree that insurance isn’t one of them. However, ignoring it altogether could cost you everything you have worked so hard to build. Here is a look at five types of insurance coverage that you need to consider before opening day.
Essential Takeaways:
- General liability protects you against customer injury and property damage claims.
- Commercial property insurance covers inventory, fixtures, and your physical space.
- Workers’ compensation is required in most states once you’ve hired your first employee.
- Business interruption insurance can replace income when a covered event forces you into a temporary closure.
- Cyber liability coverage covers the costs associated with a data breach, including notification and legal fees.
How General Liability Insurance Shields Your Store From Lawsuits
No matter how careful you are, there is always a possibility that a customer could have an accident in your store, whether they slip on a wet floor or trip over a display. When this happens, general liability insurance can save the day, covering third-party bodily injury, property damage, and certain advertising claims if you’re hit with a costly lawsuit.
This coverage doesn’t just pay for medical bills. Legal defense costs can add up very quickly, even when claims turn out to be frivolous. Most landlords require you to present proof of general liability before signing your lease, so you will need this before opening day.
What Commercial Property Insurance Protects
In retail, your inventory is everything. A single act of vandalism, a fire, or a burst pipe could wipe out thousands of dollars’ worth of your merchandise in the blink of an eye. Commercial property insurance covers your building (if you own it), as well as interior fixtures, signage, equipment, and stock.
Keep in mind that if you are leasing space, your landlord’s insurance policy will not cover your belongings. Fixtures, displays, and merchandise will need separate coverage. A business owner’s policy, or BOP, is often the most affordable way to bundle property and liability together for smaller retail operations.
Why Workers’ Compensation Is Required Before Hiring Your First Employee
Almost every state currently mandates workers’ compensation insurance for businesses as soon as they hire employees; in some states, having just one part-time worker is enough to trigger this requirement. Workers’ comp will cover the medical expenses and lost wages involved should one of your employees become injured on the job. This is very important because workplace injuries happen more often than you might think. In retail, back strains and stockroom slips are not uncommon.
If you operate without this type of coverage in an area where it is required, you could be responsible for fines, lawsuits, and even criminal charges. But it’s not just the legal ramifications you need to worry about; workers’ comp also makes a lot of sense from a financial standpoint. It is cheaper to maintain this type of policy than it is to pay an uninsured workplace injury claim.
How Business Interruption Insurance Can Keep Revenue Flowing After a Disaster
Although your property insurance would likely cover the repairs if a fire damages your storefront, how would you get by during the months it takes to rebuild? You will still owe rent, loan payments, and other expenses during the downtime, and this is where business interruption insurance can keep you afloat. It covers the revenue your store would have earned while you’re unable to operate due to a covered loss.
What Cyber Liability Insurance Covers When Customer Data Is Compromised
There is no denying the central role technology plays in retail operations these days, even if your transactions are strictly in-person. You are almost certainly processing credit cards, and you might also be collecting email addresses or storing customer data for loyalty programs. All of this makes you an attractive target for cybercriminals, who often seek to exploit the weaker security small retailers have compared to larger corporations. Cyber liability insurance can cover the costs associated with data breaches, including credit monitoring, regulatory fines, legal defense, and customer notification.
How to Start Building a Retail Insurance Plan That Fits Your Budget
Every store has different insurance needs, and your premiums depend on your location, inventory value, employee count, store size, and other factors. For many retailers, a business owner’s policy is a good starting point because it bundles commercial property insurance and general liability insurance for a lower price than you would pay for these types of coverage individually. You will also need to add workers’ compensation, cyber liability, and business interruption for more complete coverage.
The best approach is to work with a licensed agent who can help you determine what coverage you need and what is unnecessary. You should get the ball rolling as early in the store-opening process as possible.
Work With JMG Insurance Agency to Protect Your New Retail Business
At John M. Glover Insurance Agency, we help small retail businesses find the right coverage at the right price. We know how overwhelming it can be to sort through insurance policy options and technical documents while you’re launching your business. Contact us today to learn more about your options and start building a plan that will protect your investment from day one.
