Types of Business Insurance
There are various types of business insurance policies available for small business owners.
We’ll explain the different types of insurance policies available for your business and help you pick the right insurer for your needs.
Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.
Business Insurance Types
Having the right policies in place can help protect businesses from risks and ensure their success in the long run.
Below is a breakdown of each commercial insurance type.
General Liability Insurance
General liability (GL) insurance is not only your first line of defense against insurable perils, but it's also an integral part of affordable business insurance options.
General liability insurance is a specific type of commercial liability insurance policy that shields a business from the financial strain of claims resulting from bodily injury, personal injury, or property damage. An essential component of affordable business insurance, it strikes a balance between cost and coverage.
In addition to these core coverages, general liability insurance can extend to include "advertising injury," which encompasses offenses such as copyright infringement and libel. By exploring affordable business insurance options, you can ensure broad protection without compromising your budget.
Business Owner’s Policy
A business owner’s policy (BOP) is a combination of business liability insurance and business property insurance.
A BOP is often customized to the business it covers and is considered to be a comprehensive and affordable solution for small businesses.
Business Interruption Insurance
With business interruption coverage, you can feel confident that your business will be covered during incidents like major storms, problems with the local electrical grid, or even a hacking incident.
This coverage is designed to protect your business during covered events and can replace the money you would have made or provide funds to operate in an alternate location temporarily.
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Commercial property insurance covers your building and its contents, as well as any resulting impact on your business income, in the event of damage due to fire, theft, or a natural disaster.
Business Content Insurance
Business content insurance covers items within your business from damage or theft. This insurance differs from property insurance and in that it does not cover the dwelling.
This insurance will ensure replacement of items such as belongings, furniture, equipment, inventory, and minimize operational disruption.
Product Liability Insurance
Product Liability Insurance will protect your business from claims of injury or damage caused by your products. This insurance can help cover costs from a lawsuit or legal fees.
Not all businesses will need this insurance, but if you sell physical products that have a higher risk of lawsuits, it is highly recommended.
A commercial package policy combines various coverage types into one policy.
This policy can include property, general liability, business interruption, crime, and commercial auto insurance coverage.
Workers’ Compensation Insurance
Workers’ compensation insurance is necessary for any small business. Without it, damages for injuries incurred at work can soar past thousands of dollars and into the millions.
Without adequate coverage, employers leave themselves open to punitive damages, pain and suffering lawsuits, and potentially astronomical medical bills.
Commercial Auto Insurance
Small businesses have a lot of expenses, and one of the significant expenses is employing workers with fair wages, excellent benefits, and stability.
Commercial auto insurance helps to protect the business by minimizing the risk and keeping employees at work, vehicles on the job, and jobs on schedule.
Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) safeguards businesses against employee lawsuits alleging inappropriate or unfair acts.
Even when done unknowingly, violating an employee's rights can result in significant expenses for the business. EPLI coverage is designed to protect businesses against such claims.
Cyber Liability Insurance
With the rise of digital technology, cyber-attacks have become more frequent. Cyber liability insurance protects businesses against the costs of a data breach, including legal fees, notification costs, and credit monitoring.
This policy is crucial for businesses that collect and store sensitive customer information.
Management Liability Insurance
Also known as directors and officers insurance (D&O), this policy provides protection to company executives and directors against claims made against them by employees, shareholders, or regulators.
This coverage protects the personal assets of these individuals and ensures they are not held responsible for the company's losses.
Errors and Omissions Insurance
Errors and omissions insurance (E&O) insurance is also known as professional liability insurance. This policy provides protection against financial losses due to errors, omissions, or negligence committed by the business or its employees.
Crime coverage is designed to protect businesses from various forms of criminal activity, such as fraud, forgery, and theft. This policy can cover employee theft or theft by outsiders.
Key Person Insurance
Key person insurance provides a financial payout to the company if the executive dies or becomes too disabled to work so the company can keep operating until it finds a replacement.
Commercial Rental Insurance
Commercial Renters Insurance protects businesses leasing workspace. It covers business property against damage or theft, offers liability protection for customer or client injuries, and includes business interruption coverage for income loss during forced closures or relocation. It's vital for safeguarding business investments, though it doesn't cover the actual building or certain damages.
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Self-Employed Business Insurance
Self-employed business insurance safeguards independent professionals against financial risks. It covers potential liability claims, property damages, and income losses. Tailored to specific risks, it ensures self-employed individuals can operate with confidence, knowing they're protected.
Public Liability Insurance
Public liability insurance covers a business against claims of personal injury or property damage caused to third parties. This insurance is essential for businesses interacting with the public, as it protects against costly legal expenses and damage reparations.
Business Hazard Insurance
Business hazard insurance protects businesses against physical damages from hazards such as fire, storms, theft, or vandalism. It covers the cost of repairing or replacing damaged physical assets, helping businesses recover quickly after a disaster.
Inventory insurance covers a business's stock or inventory against loss, damage, or theft. This policy is crucial for businesses with substantial stock, ensuring they can recover quickly from any inventory-related setbacks and continue operations seamlessly.
What Is Commercial Business Insurance?
Commercial insurance is a type of insurance that is designed to protect businesses from financial losses. It can cover a wide range of risks, including property damage, theft, liability, and more.
Commercial insurance is an important part of risk management for any business, and it can help to protect the business's assets, employees, and reputation.
Here are some of the benefits of commercial insurance:
Protection From Financial Losses
If your business is sued or if your property is damaged or stolen, commercial insurance can help to cover the costs. This can help to protect your business's assets and keep it afloat.
Peace of Mind
Knowing that your business is protected by commercial insurance can give you peace of mind and allow you to focus on running your business.
Attracting and Retaining Customers
Many customers prefer to do business with companies that have commercial insurance. This is because it creates legitimacy by showing that the company is taking steps to protect its customers and its assets.
Compliance With Regulations
In some industries, commercial insurance is required by law. For example, businesses that employ workers in certain states are required to have workers' compensation insurance.
Learn more in our business requirements by state guide.
If you own a business, it is important to consider purchasing commercial insurance. It can help to protect your business from financial losses and give you peace of mind.
Qualifying for Business Loans
Banks and lenders will often require proof of insurance in the form of a certificate of insurance before approving a business loan.
The Small Business Administration (SBA) is a popular lender for small businesses. You can use our guide to learn more about SBA loan insurance requirements.
Do I need business insurance?
Yes, you need business insurance. Depending on the circumstance, it may be legally required for your business to have insurance. You will want to be covered even if it is not required to protect your business from financial loss.
What is commercial insurance?
Commercial insurance refers to a range of insurance policies that are designed to protect businesses from financial losses resulting from various risks and liabilities.
What types of commercial insurance policies are available?
Some common types of commercial insurance policies include general liability insurance, commercial property insurance, workers' compensation insurance, professional liability insurance, and cyber insurance.
What does general liability insurance cover?
General liability insurance provides coverage for claims of property damage or bodily injury caused by a business's negligence, such as if a customer slips and falls on the business's premises.
What does commercial property insurance cover?
Commercial property insurance protects businesses from damage to their property, including damage caused by fire, theft, or natural disasters.
What is workers' compensation insurance?
Workers' compensation insurance provides benefits to employees who are injured or become ill as a result of their job. This can include medical expenses, lost wages, and disability benefits.
What is professional liability insurance?
Professional liability insurance, also known as errors and omissions insurance, protects businesses from claims of professional negligence. This can include mistakes or errors made by professionals such as accountants, lawyers, or doctors.
What is cyber insurance?
Cyber insurance provides coverage for losses resulting from cyber attacks or data breaches, including the theft of customer data or other sensitive information. It can help businesses cover the costs of recovery, such as legal fees, credit monitoring services, and public relations expenses.
What types of insurance does a nonprofit need?
Nonprofit insurance is basically the same type of insurance that you would get for any business. Some of the most common ones include: general liability insurance, workers’ compensation insurance, commercial property insurance, and commercial auto insurance.
Do I need business insurance as a sole proprietor?
Yes. Actually, sole proprietors need insurance more than LLCs and corporations. Common types of insurance include: general liability, professional liability, business interruption insurance, and property insurance.