Although franchise insurance is somewhat of an umbrella term, it involves getting various cover components together and using them to protect all aspects of your franchise. If you’re running a franchise, you’ll have plenty of liabilities to consider.
In most cases, franchise insurance will consist of employer and public liability insurance, professional indemnity insurance, and more. The other components that make up your insurance will depend on your business circumstances – for example, where you’re running your business from, what cover you need for your premises and the contents of your business premises.
If you’re entering a franchise agreement, you’ll usually be required to enforce a minimum level of cover, and the details will be laid out by your franchiser. Although this can be confusing, it’s crucial that you have the right cover for your franchise. Otherwise, you may find yourself in hot water pretty quickly.
Franchises are a form of business that requires the owner to license its operations, including its branding, products, and knowledge, for a fee. However, you don’t always need business experience to head a franchise, and these concepts are pretty popular – especially because they have a much higher success rate than most business start-ups.
However, like all businesses, you’ll need to have the right insurance if you want your franchise to hit the ground running. Not sure where to start? We’re here to walk you through the ins and outs of franchise insurance, including what it is and how it works in practice.
Remember: a franchisee will own and operate the independent business, and the franchise will be able to develop the brand and open up new income streams.
Although this can be pretty lucrative, it can also carry significant risks. Without the right insurance, franchises can end up suffering from labor violations, damage to their reputations, compliance issues, and more.
Insurance for Franchises
As we’ve already mentioned, franchise insurance is pretty broad. There are various insurance policies that your franchise may need to protect its employees and its business. Some of the most common types of insurance include:
1. Business Interruption Insurance
This insurance will cover your franchise for loss of income incurred through periods of difficulty, or more specifically, when a business cannot be performed as usual, such as significant unexpected events.
This insurance is sometimes called loss of business income insurance, and it covers events such as freak accidents, natural disasters, government shutdowns, and more. This insurance can help cover the expenses required to both stay afloat and rebuild your business.
2. General Liability Insurance
General liability insurance is a type of business insurance that protects you and your business from general claims. These can include claims of property damage or injury against your business. This is one of the most popular insurance policies for franchises.
3. Equipment Breakdown Insurance
As the name suggests, this business insurance will protect you against any losses caused by mechanical, computer, or electrical faults. In most cases, your equipment breakdown insurance will give you the cover necessary to repair or replace any damaged equipment.
4. Excess Liability Coverage
Excess liability coverage (sometimes called an umbrella policy) is a form of insurance that can help supplement other insurance policies. In most cases, this coverage can give you additional coverage limits to protect your franchise. This is not an independent form of insurance, and it only kicks in when the insurance amounts of your primary liability coverage are reached.
5. Commercial Auto Liability Insurance
This insurance will help cover any responsibility incurred if you or any employee is at fault in an injury or accident that involves an automobile.
If your franchise owns, leases, or rents any vehicles, you drive company cars for business and personal use, your employees use their own vehicles for business, or they drive company-owned, rented, or leased vehicles, you’ll need commercial auto liability insurance.
6. Workers Compensation Insurance
Worker’s compensation insurance will provide compensation and benefits to employees and cover them against any injuries occurred in the workplace or occupational diseases. There are many benefits attached to worker’s compensation insurance, but some of the most popular include:
- Death benefits
- Cover of medical expenses
- Cover of lost wages
- Work-related rehabilitation
- Disability benefits
Whatever the nature of your franchise, there’s always a risk that employees could be injured. This insurance provides a high standard of cover your employees will need to feel secure and protected.
7. Property Insurance
Lastly, we have property insurance. Property insurance for business (sometimes called commercial property insurance) can help cover the costs of rebuilding or repairing your business property or replacing lost or damaged equipment or stock.
This cover usually comes into action in the event of risks such as fire, falling trees, or burst pipes. Although you’d hope none of these things will ever happen, it’s good to think ahead and be prepared.
Can You Get All These Insurances Under One Cover?
Yes, some providers will offer all of these insurances under one franchise coverage umbrella. In fact, most providers will cover everything from motor insurance to more niche cover, such as credit insurance. The cost of your franchise insurance will depend on several factors, so it’s impossible to give a hard and fast figure.
The cost will usually depend on your supplier, the nature of your franchise, and what types of cover you need. To find the right coverage for your franchise, talk to a business insurance provider or financial planner for more information.
The Bottom Line
Running a franchise can be a lucrative business move, but it doesn’t come without its risks. Like all business endeavors, you’ll need to have safety blankets in place to protect you and your employees. This is where franchise insurance comes in.
With the right insurance, you can protect all aspects of your franchise, from your property and lost assets to your workers’ health and safety. It’s a multifaceted insurance with many moving parts, but you’ll need to consider all aspects of coverage to be successful.