Your small business is vulnerable to not only competition but also natural disasters and lawsuits from employees, customers, or other businesses.
A 2017 study showed that at least a third of small business owners will face a situation in a given calendar year that could lead to a claim. This makes small business insurance a no-brainer.
Our guide will help you understand the differences in types of coverage and providers of insurance as well as discover solutions specific to your state or industry.
Recommended: Next Insurance combines a high level of protection with the best premiums. Get an online quote.
How Do You Buy Small Business Insurance?
How businesses shop for insurance is changing. The best option is no longer to visit a brick-and-mortar location or spend extensive time on the phone to find coverage. Instead, the industry has been transformed by the rise of on-demand or online business insurance providers, allowing you to pick your coverage and instantly buy a policy without interacting with a broker or agent.
Online insurance agencies generally provide comparable coverage to a traditional insurer at a lower price. As a result, a growing number of small businesses prefer to use online business providers to find personalized insurance products and save on costs. They offer other benefits as well:
- Mobile Apps: Easily find out what is covered, file claims, access policy documents like the Certificate of Insurance (COI), and get other resources to help your small business.
- Personalized Coverage: Less than one-third of current insurance owners are satisfied with their current level of coverage. The biggest reason? Lack of personalized coverage. Online insurance providers use AI and predictive data to provide customized insurance options tailored to your business’s unique risks.
- Lower Premiums: Online insurance providers save on expenses by not having brick-and-mortar locations or full-time agents and using AI for more accurate underwriting. They pass on these savings to their customers through lower premiums.
- Quick Turnaround on Claims: You can file a claim online and receive a resolution, usually within 48 hours
- Convenience: Save time by avoiding speaking to an agent on the phone, get a quote instantly and insure your business within 24 hours.
Two Ways To Start Coverage
Compare Quotes Online
Use our dedicated small business insurance provider to generate a quick and accurate online quote, specifically for your small business.
Speak With an Insurance Representative
Prefer speaking with someone before you purchase insurance? Representatives are online from 8:00 a.m.–8:00 p.m. ET, Monday–Saturday, to answer your questions and help you discover the best coverage.
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.
How Much Will It Cost to Protect Your Business?
Insurance companies use several factors to calculate your monthly premium. Some of the well-known aspects include:
- Type of coverage
- Number of employees
- Geographical location of your business
- Financial stability
- Existing safety and security features of your building, equipment, and/or vehicles
It’s estimated that small businesses pay anywhere from $14–$124/month for any one kind of insurance coverage. Below is a chart that shows you the average cost of popular types of coverage:
|Type of Policy||Average Monthly Cost||Average Annual Cost|
|General Liability Insurance||$30||$360|
|Commercial Property Insurance||$63 (median)||$756 (median)|
|Inland Marine Insurance||$14 (median)||$169 (median)|
|Cyber Liability Insurance||$123.75||$1,485|
|Business Interruption Insurance||$40||$480|
|Total Average Cost:||$340.75||$4,090|
Sources: AdvisorSmith, The Hartford, Hiscox, and Insureon
Understand the Different Types of Insurance
Below are the most common types of insurance policies that a small business may need. Each offers a different set of protections based on the different needs of your business.
While these are not the only types of insurance available, they are the ones most frequently needed by different businesses.
General Liability Insurance
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
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?
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
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
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.
Business Owners' Policy
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, so having LLC insurance is recommended. 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.
Nonprofits are considered corporations and hence susceptible to lawsuits and liabilities, just like for-profit corporations. In fact, because nonprofits often work with volunteers who may not go through an exhaustive background check or conduct business without formal contracts or agreements, they stand a greater risk of being sued for agreement disputes and/or harassment. Nonprofit insurance is usually a good protective measure for the majority of such liabilities.
Business Umbrella Insurance
Business umbrella insurance, also known as commercial umbrella insurance, supplements your existing liability coverage and is not a standalone form of protection. It will protect you against liabilities that exceed your current limit of protection. For example, a customer is injured by your using your product and sues you for $500,000 and wins the lawsuit. However, your current general liability protection insurance only protects your business for up to $300,000 in liabilities. Business umbrella insurance will cover the difference.
Small Business Insurance by State
We’ve compiled a guide to help you understand business insurance in any of the 50 states. Choose your state to get started:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington D.C.
- West Virginia
Bundled Insurance vs. Individual Coverage
It’s difficult to anticipate every single crisis that could affect your business, but according to the Insurance Information Institute, the most common policy for small businesses is a business owner’s policy (BOP).
A BOP bundles multiple types of coverage to cover the majority of property, accidents, and claims liabilities into a bundle that will provide extensive coverage for a small business. Not all businesses will qualify for a BOP — if you do, your premium will depend on the nature of your industry, existing safety and security features, business location, and financial stability.
In many other cases, you would have to purchase individual types of coverage like:
- General liability insurance
- Professional liability insurance
- Workers’ compensation insurance
- Business property insurance
- Commercial auto insurance
- Cyber liability insurance
Some insurance policies cover specific business activities and serve unique industry-specific protections like cyber liability insurance.
Our recommended insurance provider uses your business information to recommend a coverage option that is most suitable for your industry type.
Business Insurance FAQ
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 depends on your industry and the different types of policies you choose to take on for your business.
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 insurance 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.
How do 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.
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