What Insurance Do I Need For a Small Business?
The type of business insurance a company needs can vary greatly.
While there are standard types of coverage like general liability insurance and professional liability insurance, workers’ compensation, and insurance for property and company-owned cars, there are also insurance policies that cover specific business activities and specialized equipment.
You can bundle most of these into what is called a Business Owner’s Policy (BOP) by a trusted insurance provider to get you started doing business.
Read our review of the best small business insurance companies.
What Is Covered by Business Insurance?
Business insurance covers businesses from losses that can happen in the natural course of doing business. This can come from various situations, like property damage, lawsuits, loss of business income, bodily injury, fire, and more.
What you choose to get covered for depends on your business, and the different types of policies you choose to take on for your business.
Business Insurance by Industry
We have written insurance guidelines for over 650 types of small businesses. We know that each business has different protection requirements, so we've compiled the types of policies that each business needs into one location to make your research go just a little faster. Some of our most popular guides include:
Or, see the full list of business insurance guides by industry.
What Are the Different Types of Business Insurance?
Below are the most common types of insurance policies that a small business may need. Each of them offers a different set of protections based on the different needs of your business.
While these are not the only types of insurance that are available, they are the most frequently needed of all varieties of businesses.
General liability insurance is the most common type of business insurance, as it covers the most basic needs that are shared among all types of companies. Things like bodily injury on your business's property and physical damage caused by employees are covered by this policy. If you aren't sure which types of insurance your company needs, you should start here.
Professional liability insurance, also known as errors and omissions (E&O) insurance, is a policy that is meant to protect professionals in the workplace. Expert advice given to a client by you or your employees may not always lead to the desired result. This can leave you open to liabilities if the client is financially damaged and blames your company. This coverage is protection for you against that liability.
Workers' compensation insurance is meant to protect the interests of your employees if they are injured on the job. It can also protect your business from a lawsuit if that employee needs compensation for their injuries. Workers' comp is mandated in most states if you have any employees. Read this page to learn about the requirements in your state.
Commercial property insurance is similar to homeowner's insurance on your personal home. It protects your building and its contents against "named perils" like fire, theft, and inclement weather.
Commercial auto insurance works a lot like your personal auto insurance. If your company owns a vehicle, you are mandated by the state to carry at least the state minimum coverage to drive it on public roadways. There is some complexity surrounding what is and is not covered if you drive your personal vehicle for business use, so be sure to do your research to make sure you are fully covered.
A business owner's policy is a group of insurance policies targeted at small businesses. Normally, you will find these policies containing general liability, commercial property, and business interruption insurance. Since they are packaged and sold as one policy, this makes the administration of your protection simpler, and it may even come at a discounted rate.
When starting a new business, the simplest way to protect your personal assets is to form an LLC. Forming an LLC separates your business activities from your personal assets. The major benefit of this separation is that if your business is sued, your personal assets (like your home and savings account) will be protected. But what about your business assets? If your business is sued, the LLC does not protect the assets of your business (your business’s bank accounts, property, inventory, etc…). So what will protect your business in the event of a lawsuit? Business liability insurance for your LLC.
Other Types of Business Insurance
While the insurance products listed above are what most businesses need to get started, they’re not the only type of insurance available. If your business needs additional coverage for a specific aspect of what it does day-to-day, consider insuring yourself for the following:
- Unemployment Insurance
- Disability Insurance
- Key Person Insurance
- Trucking Insurance
- Liquor Liability Insurance
- Inland Marine Insurance
- Employment Practices Liability Insurance
- Rideshare Insurance
- Commercial Property Insurance
- Excess and Surplus Insurance
- Employee Pet Insurance Benefit
- Health Insurance
- Business Income Insurance
- Commercial Umbrella Insurance
- Commercial Flood Insurance
- Employment Practices Liability
- Multinational Insurance
- Home-based business insurance
- Surety & fidelity bonds
- Many more
Do I Really Need Business Insurance?
Businesses need insurance for several reasons. Depending on the state they operate in, businesses may be required to get specific types of insurances like workers’ compensation and unemployment insurance as well as insurance for specific things the business does.
In addition to this, some businesses may refuse to work with you unless you carry your own insurance, as they do not want to assume the risks and liability for your work on their own insurance.
When Should I Get Business Insurance?
You should get business insurance when you start your business, especially if you plan to start doing business right away. This way, you can be protected from the very beginning from any lawsuits, property damages, costs associated with bodily injury, and anything else that could happen to your business.
How Much Should Business Insurance Cost?
The cost of business insurance for a small business is typically between $700 and $3,800 a year, but this depends greatly on what types of insurance your business needs.
We recommend doing some research into the risks faced by your business and getting a business insurance quote from a trusted source.
What is the Best Small Business Insurance Provider?
There are many small business insurance providers on the market today. However, there is one that we have come to recommend for their fair prices and excellent customer service: CoverWallet.
Frequently Asked Questions
What are the benefits of insurance to business?
The biggest benefit of getting business insurance is to help cover financial losses that can happen during the normal course of doing business, such as lawsuits, bodily injury, property damage, flooding, and more.
Beyond this, the other benefits are that your business will be able to operate within your state, and other businesses will be more comfortable working with you, knowing that you carry your own insurance.
Do I need business insurance for an LLC?
Yes. An LLC, like any other business, needs business insurance for many reasons. These include state operating requirements and an overall easier experience working with other businesses.
How do I get business insurance?
Getting business insurance starts with researching the types of risks your business may face during its normal course of doing business.
After finding these risks, finding a few trustworthy commercial insurance agents who can help you match your business with the right policies, and so that you can choose between them for the best level of coverage for the best price. You can do this every year to ensure you’re always getting the right deal as your business grows.
What happens if I don’t have business insurance?
If you choose to run a business without insurance, there are a few things that can happen:
- Your state or local government may shut down your business if you do not satisfy their insurance requirements, as you are violating their laws. In addition to this, you may be forced to pay a penalty.
- In the event of any liability, such as property damage, injury, etc., you can be held responsible to pay in full any court-appointed charges, with no benefit payout to help cover the cost.
- Businesses may choose not to work with you, as they do not want to assume all of your risk on their own insurance policy.
How much is business insurance for an LLC?
The cost of business insurance for an LLC is typically between $700 and $3,800 a year, but it depends on what types of insurance your business needs.
We recommend doing some research into the risks faced by your business, and getting a business insurance quote from a trusted source.
Do I need Business Insurance if I’m a Sole Proprietorship?
Yes, sole proprietorships like other businesses should get business insurance. While local and state laws may vary on what types of insurance are required to be in compliance compared to other business structures, you should do the research to find out your state or city’s requirements.
In addition to this, having your own insurance covers you in the event of any issues during the normal course of business, and makes it easier to work with other companies who may not want to assume your risks with their own insurance.