Business insurance is like a life raft for a boat; you know you need it but hope you’ll never use it.
And similar to a life raft, your chosen insurance policy must be adequate to keep your business afloat.
Choosing the right insurance for your small business can be confusing, and if you get inappropriate coverage, expensive.
To help you navigate the world of business insurance, we’ll explain what small business insurance is, what different policies cover, why you might need them, and how to choose an insurance provider.
After that, it’s plain sailing.
Depending on the policy, small business insurance can financially protect your business from risks like natural disasters, theft, fire, accidents, and small business owners from liability cases of litigation and worker’s compensation claims.
Any business with assets, employees, or potential liabilities, regardless of size, industry, or location, can benefit from business insurance.
Some common types of businesses that often require business insurance include:
Many businesses need insurance to operate, such as general liability, commercial auto, and worker’s compensation insurance. For others, specific policies might be an optional extra.
To answer the question, do I need business insurance? Weigh the expense of replacing your business equipment or products and the risk of a client suing your business with insurance costs.
If the risks outweigh the costs, buying insurance for your small business could be a wise decision.
Below is a list of the 14 popular types of insurance to help you determine your small business insurance needs:
There are several types of business insurance, but when starting a business, your specific insurance needs will vary depending on its size, industry, assets and liabilities, and risk level.
To help you choose, here are the most common types of business insurance.
General liability insurance protects your business against third-party claims of bodily injury or property damage caused by your business operations.
For example, if a customer visits your store and slips on a wet floor, they could sue you for damages.
And as most U.S. states require small business owners to have general liability insurance, it might be the first policy to add to your list.
Covers:
Claims made by third parties, such as customers, clients, or members of the public, and legal defense expenses, settlements or judgments, and any necessary medical payments.
Professional liability insurance, or errors and omissions insurance, protects your business from financial losses caused by mistakes or failure to perform its professional duties.
For example, If an accountant makes a mistake and their client suffers a financial loss, they could sue the accountant. Professional liability insurance covers the cost of defending against the lawsuit and any damages awarded.
Covers:
Covers third-party claims caused by an error or omission while providing professional services, such as accountancy, consulting, or design.
Business income insurance, or business interruption insurance, provides financial protection in the event of a temporary shutdown or loss of income.
Covers:
Covers the ongoing business expenses and lost profits if you cannot operate, such as rent, utilities, and any lost profits.
Commercial property insurance provides financial protection for a business’s physical assets and property, such as buildings, equipment, and inventory.
Covers:
Covers the cost of repairing or replacing property and equipment damaged or destroyed by fire, theft, or natural disaster.
Commercial auto insurance protects vehicles used for business during regular working hours and duties.
Covers:
Covers the repair or replacement costs caused by theft, vandalism, natural disasters, or accident, including liability for damages or injuries to others.
Workers’ compensation insurance provides financial protection for employees in the event of a work-related injury or illness.
Covers:
Covers the cost of medical expenses and lost wages for the employee.
Who needs it:
Most U.S. states require businesses with employees to have workers’ compensation insurance.
Employment practices liability insurance, or EPLI, provides financial protection against employee claims for workplace-related issues such as harassment, discrimination, and wrongful termination.
Cybersecurity liability insurance protects businesses against losses resulting from cyber-attacks and data breaches.
Covers:
Covers breach response costs, such as notification and credit monitoring services, and any legal expenses and damages resulting from a breach.
Identity theft insurance protects business owners against losses resulting from identity theft.
Covers:
Covers the cost of restoring your credit and identity, legal expenses, and lost wages resulting from identity theft.
Product liability insurance protects your business against claims resulting from injuries or damages caused by your products.
Covers:
Covers the cost of defending against a claim and any damages awarded.
Key person insurance, or key man insurance, provides financial protection for a business if a key employee dies or suffers a disability.
Covers:
Covers the loss of income and provides funds for finding and training a suitable replacement.
Director and Officer Liability Insurance (D&O) provides financial protection for directors and officers of a business against claims resulting from their actions.
Covers:
Covers the cost of defending against a lawsuit and any damages awarded.
Commercial umbrella insurance provides additional liability protection against potentially catastrophic losses.
How it works:
If a client files a liability claim against your business that exceeds the limits of your standard liability insurance policies, commercial umbrella insurance would kick in and provide any additional coverage required to protect your business.
A Business Owner’s Policy (BOP) provides a bundled coverage package for small to medium-sized businesses, typically including general liability, property, and business interruption insurance.
Choosing the best business insurance isn’t rocket science, but it can feel like it because of the different policies and pricing.
As mentioned, most small businesses will need general liability and worker’s compensation for those with employees.
After those, you can determine your other business’s insurance needs by assessing your risks and liabilities.
Tailor Brands offers small business insurance services, so if you feel this may be overwhelming, we got you covered!
Your first step is to assess your business’ risks and liabilities by evaluating your property, employees, products, services, and other factors that could cause financial losses or legal liabilities.
After assessing your risks and liabilities, clarify which insurance coverage you’ll need to protect your business.
Business insurance can be expensive, so consider your budget before agreeing to individual insurance coverage, as a business owner`s policy could save you money.
Carefully read the policy’s terms and conditions and any exclusions or limitations, as it’ll help you understand precisely what the policy covers.
And ask the insurance provider to explain every detail. After all, that’s where the devil is, and insurance companies are no angels!
An alternative option to choosing the best business insurance is hiring a reputable insurance agent or broker to do it for you.
Insurance professionals know what to look for, can help you understand your options, and provide valuable advice and guidance.
Once you know your insurance needs, shop around to compare insurance policies and get prices from several providers. And look for independent reviews online to see what other business owners say about them.
Small business owners that require several types of insurance and need to save money could consider a business owner’s policy or commercial packages that combine the most common insurance cover, like general liability, commercial property insurance, and business interruption insurance.
You can get estimates and buy your insurance online within minutes, but before you do, check out the 9 most popular insurance companies below to get an idea of what’s on offer.
When you know which insurance you need, it’s time to select your insurance provider, and there’s plenty to choose from.
Most offer standard insurance coverage, including general liability, commercial auto, property insurance, and worker’s compensation. But others provide industry-specific insurance and business owner`s policies that could suit your needs and budget.
To give you an idea of what`s available, below are 9 leading insurance providers and the policies they provide.
The Hartford is a well-known and respected insurance company that offers a wide range of small business insurance policies, including:
State Farm is a large, independently owned insurance company that prides itself in offering industry-specific insurance coverage to small businesses, including:
Nationwide is one of the world’s largest insurance companies and offers a vast range of business insurance products that cover most industries, including:
Allstate is another independent insurance company based in Northfield Township, Illinois, that offers business insurance products, including:
Thomas Caldecot Chubb and his son Percy began their marine underwriting business in New Jersey in 1882. Today, Chubb is one of the world’s largest insurance companies, operating in 54 countries and selling a wide range of insurance products, including:
Travelers Inc, known as Travelers, is the second-largest writer of U.S. commercial property casualty insurance and offers a wide range of industry-specific business insurance policies, including:
Another giant of the insurance world, Liberty Mutual offers a variety of commercial packages and specialty business insurance coverage for small businesses, including:
AIG operates in 80 countries and employs over 46,900 people, making it a leading insurance company that provides a wide range of commercial business insurance, including:
Founded in 1937, Progressive is the largest U.S. commercial auto insurer and the 3rd largest insurance carrier. And while it’s best known for commercial auto insurance, it offers a complete range of small-business insurance services, including:
Progressive also offers more specific insurance, including:
Business insurance policies protect you against unexpected losses caused by natural disasters, lawsuits, and accidents during regular business operations.
Many business insurance types exist, including general liability, professional liability, commercial auto, commercial auto, business income, and worker’s compensation.
All ensure a business receives financial support (or other benefits) after an insurance claim.
The business insurance you need depends on your business type, its structure, and whether you have employees.
For example, legal structures like LLCs have limited liability built in. In contrast, sole proprietorship owners are liable should their business be sued or if they incur debt.
The Federal government requires businesses with employees to have the following insurance:
That said, most businesses need general liability insurance as it protects against cases of client injury or property damage caused by your operations or employee actions.
Business liability insurance costs can range from a couple of hundred dollars to thousands depending on the business operations, size, and location.
However, the average business liability insurance cost in the US is $800 annually.
Small business insurance costs depend on various factors, like your industry and the insurance coverage you select.
A recent report from The Harford (a leading commercial insurance provider) shows their average customer pays $85 monthly in business insurance costs.
It takes 5 steps to get the right business insurance; the key is knowing which insurance coverage fulfills your business needs, comparing prices and terms, and using a reputable insurance provider before purchasing.
5 steps to get business insurance:
The answer depends on your business type and the insurance cover you buy. Still, business insurance generally helps protect you against everyday risks during regular business activities, like employee injury, mistakes, property or stock damage, business interruption, and legal costs in litigation cases.
The general rule when considering insurance is to cover things you can’t afford to pay for yourself.
General liability insurance often tops the list as it helps cover expenses to client property damage or injury caused by your business activities. General liability insurance (also known as slip and fall insurance) also covers claims by the public in case of injuries in your workplace.
The cost of LLC business insurance depends on your chosen industry, whether you have employees, and the policies you decide to buy.
To reduce costs, many LLC owners choose a Business Owner’s Policy (BOP), as it combines 3 popular insurance policies in one.
They include:
The average price for BOP is $57 per month or around $684 annually.
Businesses need business insurance to protect against claims that could cause severe financial disruption to their operations and livelihoods.
The key is choosing the right policy for your business.
Take your time accessing your business risks, check the terms and conditions, and shop around to find a suitable policy at the best price.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.
Terry is a serial entrepreneur with over 25 years of experience building businesses across multiple industries – construction, real estate, e-commerce, hotelier, and now digital media. When not working, Terry likes to kick back and relax with family, explore Taoism’s mysteries, or savor the taste of fine Italian red wine.
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