When starting a new tour business, one of the most vital steps is protecting your assets. To do so, you will need liability insurance.
While liability insurance is essential, as a new tour operator you may be wondering what you need coverage for and how much it will cost.
In this post, we’ll dive into the ins and outs of liability insurance as well as what you should consider.
Disclaimer – Before we dive in, this post is designed to be a general primer into liability insurance for tour operators. For specific details and questions about different policies, we recommend reaching out to your insurance agent or lawyer.
What insurance do I need for my tour business?
f you are thinking about starting or have recently launched a tour business, you may be wondering what to insure and if have enough insurance to cover all of your assets. Let’s get the nitty gritty insurance details out of the way so can focus on the joy of sharing an adventure you love with your guests.
Every business has a unique set of liabilities, so deciding which liability insurance you need comes down to asking yourself this:
What could possibly go wrong and how can I mitigate damage?
While brainstorming “worst-case scenarios” isn’t fun, isn’t it better to have a plan in place if something does go awry?
Here are some examples of potential questions to think through:
- Who will replace the kayak that fell off your rig while transporting the fleet?
- Who covers the emergency medical costs if a customer breaks his leg on your zipline tour and later files a lawsuit to recoup the money he is out from medical bills?
- What happens if one of your tour guides gets COVID-19 after being exposed on a tour?
Deciding what type of coverage you require when you first launch your business will allow you to focus more time on providing a great guest experience.
Keep in mind that most policies are for an entire year, even if your business is seasonal. This is a benefit since your equipment will be covered in the event of loss or damage during the off-season.
In addition, your state may have specific insurance required for your type of tour. For example, Washington state requires workers’ compensation through the Department of Labor and Industries. Additionally, they require minimum coverage for business vehicles of $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, and $10,000 property damage liability per accident.
The importance of carrying adequate liability insurance
Between 2007-2013, the canoeing industry suffered more fatalities than kayaking, rafting, and paddleboarding combined. Canoeing may seem like a safe enough activity, but this statistic proves that accidents do happen — and why emergency medical coverage is essential.
While a fatality is definitely the worst-case scenario, even a minor customer injury could lead to a personal injury settlement that is not only costly but time-consuming. One case could take years to settle.
Starting and maintaining a business is expensive enough. If you have a fleet of 20 canoes and they are stolen or catch fire, you are looking at a minimum of $5,000 to replace them. Liability insurance helps you eliminate that financial risk.
How much does liability insurance cost?
Your local insurance agency might be able to provide a basic policy that covers all your needs through one plan or with add-on riders. Still, tour businesses might need to have an additional policy through an agency that specializes in tour operations such as Excursion Insurance, CNA International, or XInsurance.
In addition, you should consider how much your assets (equipment and/or property) are worth. It is often better to consider a higher coverage amount that your business can grow into over being underinsured and potentially on the hook in the event something goes wrong.
The level of danger inherent in your business is also a factor. Adventurous activities will require comprehensive policies that cover emergency care and so on. For example, a kayak rental business or walking tour will have lower premiums than a scuba diving business or an axe-throwing venue.
Pro Tip: The average annual plan cost for $1 million in coverage for a tour operator is $350-$700.
The 6 most popular types of liability insurance
There’s a wide variety of liability insurance types offering different levels of coverage depending on the businesses they protect.
Ask your insurance agent to customize your insurance policy or policy package to your specific needs.
1. General/business liability insurance
General/business liability is imperative.
This covers legal fees for customer injury and property loss.
The kayak that fell off your rig? This covers the replacement cost.
This insurance will also cover legal fees to sue for less likely events such as copyright infringement or slander from a competitor.
Perhaps most interesting right now, as many small businesses navigate uncertain times due to the pandemic, is that general/business liability insurance includes legal and relocation fees if your business is wrongfully evicted from a rented building or property.
2. Auto liability insurance
If you provide transportation for your customers, auto liability will cover both owned and rented vehicles beyond the scope of personal auto policies.
Whether you are transporting paddleboarders to your favorite cove at sunrise in Florida or sunset in California, auto liability covers what you are accustomed to with your personal auto policy, only with higher weight restrictions and limits of liability.
When your business vehicles are insured, any employee may drive. This will allow you to take multiple vehicles (i.e. more customers) on each excursion or have one employee shuttle customers while the other remains on location.
3. Watercraft liability insurance
Whether the watercraft has a motor or not, this insurance is mandatory in most states for watercraft operators, so ensure it is covered in your general/business liability policy or an add-on rider.
This will cover emergency medical costs for customer injury specific to the watercraft as well as the loss of or damage to personal belongings.
4. Professional liability insurance
Here is another one that you’ll want to add if it is not included in your general/business liability policy.
This is for the mistakes you didn’t mean to make or changes you couldn’t help but make.
Nicknamed the “errors and omissions policy,” professional liability covers the accidents made through typos or data left out of a tour description. It covers legal fees for cases of misrepresentation (the artisan lunch promised is fried Spam sandwiches) or violation of good faith (a loyalty program was shut down or not allowed to be used as promised).
5. Employer liability insurance
Many states require businesses to apply for workers’ compensation through the Department of Labor. If your state does not provide this service at the government level, adding employer liability will protect your business during lawsuits launched by employees as well as pay for employee medical care, disability, and even funeral in the case of a death on the job.
6. Business interruption liability
Seattle, Houston, and Austin shut down due to snow for a week? Impossible.
But then, in February 2021, it happened and interrupted thousands of travel plans.
For tour operators with business interruption insurance, customer refunds due to business closures and trip cancellations were taken care of by their insurance companies.
A natural disaster is an extreme example, but unforeseen events happen all the time.
A rained-out performance or a lightning storm forecast during a water event is more common. While bad weather won’t cause weeks of cancellations, it is money lost.
Additional best practices for protecting your business
Liability waivers are a simple way to further protect your business. Our post on Liability Waiver Best Practices gives a clear path to how you can use digital waivers to simultaneously protect your business as well as ways you can use this information in your marketing.
In addition, you should also have a cancellation policy, which should be available on your website and in your digital waiver. You should clearly state your terms for how and when guests can cancel a booking as well as your refund policy.
Finally, what emergency medical plans do you have in place? While keeping your first aid kits stocked is probably first on your list, other items to keep near – such as emergency blankets, survival tents, etc. – will depend on your type of tour and customer demographic. For example, if your business is based in Florida, you might want to have an evacuation plan in place for how to board up and secure your venue in case you have to evacuate due to a hurricane.
***
In sum, taking everything into account, liability insurance is as important of an investment as your equipment. Shopping around for an insurance company that is the perfect fit for your business is as important as shopping around for a vehicle and kayaks.
