Small Business Insurance
Every small business needs to have small business insurance to protect the business's assets from liabilities.
The best small business insurance will be individualized to the company's needs, be affordable, and will have an easy claims process.
Our guide will help you understand how to choose small business insurance and direct you to some of the best providers for your unique business.
Recommended: Find policies dedicated to small business and experience the benefits of a fast, fully digital process with Next Insurance.
General Liability Insurance for Small Business
General liability insurance, also known as commercial general liability insurance (CGL), is a basic small business insurance coverage designed to protect the assets of your small business from claims that arise from normal business operations.
The vast majority of business owners purchase general liability coverage. It’s an excellent starting point, and for many businesses, it’s all they will need.
General liability insurance covers:
- Third-party bodily injury
- Third-party property damage
- Legal defense costs
- Advertising liability
- Libel and slander
- Copyright issues
The average cost of general liability coverage ranges from about $300 to $1,000 per year. You can learn more in our General Liability Insurance guide.
The Cost of Small Business Insurance
Business insurance providers use several factors to calculate monthly premiums, including:
- Type of coverage
- Number of employees
- The geographical location of your business
- Financial stability
- Existing safety and security features in any commercial spaces
- Claims history
It is estimated that US small businesses spend, on average, $25-$85/month for business insurance.
|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
Types of Business Insurance
Business Owner’s Policy
A business owner’s policy (BOP) is an affordable way to bundle business insurance coverages. This type of policy includes commercial general liability insurance with commercial business property insurance. Many small business owners with a physical business space opt for this coverage.
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
You need to carry commercial auto insurance if your company uses vehicles to transport people or goods. This type of business insurance is very similar to personal auto insurance and covers liability, medical costs, collisions, and uninsured/underinsured motorists. A commercial auto policy also covers vehicles rented or owned by your company and employees who use their own vehicles for company business.
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.
Professional Liability Insurance
Professional liability insurance covers financial risks to attorneys, accountants, and others who provide professional services or expertise. Professional liability coverage varies depending on the industry but usually includes negligence, legal defense, slander or libel, and copyright and trademark disputes.
Professional liability insurance includes errors and omissions insurance.
Data Breach Insurance
If your company hosts customers’ personal information on its servers and those servers are hacked, lawsuits and damages can result. Data breach insurance protects you in these cases.
Cyber Liability Insurance
Similar to but more comprehensive than data breach insurance, cyber liability insurance may pay for legal expenses related to a data breach or set up a call center for individuals affected by a breach. It also may pay for active protection against cyberattacks.
Commercial Crime Insurance
Crimes like extortion, forgery, burglary, computer fraud, and embezzlement are covered by commercial crime insurance. Situations in which this type of business insurance is particularly useful include dishonest or libelous acts by employees.
Fiduciary Liability Insurance
Fiduciaries, who are legally required to act in plan participants’ best interests rather than the company’s when choosing advisors and investments, should consider this type of business insurance coverage. It covers them if they are sued for allegedly providing negligent investment advice or administering plans or benefits incorrectly.
Third parties like out-of-company consultants and benefit plan administrators are usually not protected.
Directors and Officers Insurance
Any company with directors and officers should consider directors and officers (D&O) insurance coverage, a type of liability insurance that reimburses directors and officers for claims made against them regarding harm allegedly caused by their management decisions.
Executive Risk Coverage
Executive risk insurance is business liability insurance that provides coverage for fraud, D&O, employment practices, initial public offerings, pension funds, extortion, and professional negligence.
Employee Health/Life/Disability Insurance
Companies that provide health, life, and/or disability insurance as a fringe benefit will need appropriate business insurance. Under the Affordable Care Act, firms with more than 50 full-time employees must offer health insurance or pay an expensive penalty.
Business Income Insurance
Business income insurance, also known as business interruption coverage, protects small business owners from lost business income after a covered peril.
Small Business Insurance FAQ
What type of insurance is best for a small business?
The best insurance for small businesses depends on your specific small business and what your business needs are. To get started, most businesses will benefit from carrying general liability or business owner’s policies.
What business insurance companies offer online quotes?
Next Insurance is the best online business insurance company that offers a completely digital experience. Small business owners can get a quote, sign up for business insurance policies, get proof of coverage, and file claims all from the Next Insurance website or via mobile app.
Do I need business insurance for an LLC?
Owning a limited liability company (LLC) does not exclude your small business from state and licensing requirements. You'll want to research your local requirements for the type of small business you operate to determine what coverage, if any, is legally required.
Learn more in our LLC insurance guide.
How much does small business insurance cost?
The amount of small business insurance you need depends on the type of small business you operate. The average cost of small business insurance typically ranges between $700 and $3,800 per year. Costs will vary depending on factors such as location, type of work, number of employees, type of insurance policy, and more.
Who has the cheapest business insurance?
We found that Next Insurance offers the cheapest business insurance policies via their online quote generator. The cost of business insurance will ultimately depend on the type of business, amount of coverage needed, level of risk, and affordability.
What does small business insurance cover?
There are multiple types of small business insurance, and together, they cover just about anything your business might face. Learn more in our complete guide to business insurance.