Business insurance helps protect your business against the financial fallout of accidents, lawsuits, property damage, and other unforeseen events.
Even the smallest LLC or sole proprietorship faces legal and financial risks that a business insurance policy can help offset. The right coverage can safeguard your assets and keep your business running smoothly.
Here’s what you need to know about business insurance, including the types of coverage available and how to buy a policy.
Business insurance is an umbrella term for insurance policies that protect your company against financial losses due to unexpected events. These policies cover things like property damage, lawsuits, employee injuries, lost income, data breaches, and more. The goal is to help businesses stay afloat and recover after disruptions — whether it’s a fire, a customer injury, or a cyberattack.
Businesses often purchase a mix of policies to ensure they’re fully prepared for unexpected losses. Depending on the insurance company, you may have access to commercial auto insurance, general liability, commercial property, workers’ compensation, business interruption insurance, and more.
The right policy for you depends on the size of your business, your industry, and risk exposure. A freelance writer, for example, may need professional liability insurance, while an Uber driver will need rideshare insurance.
Your business’s legal structure may help protect your personal assets from lawsuits or legal claims, but it won’t do the same for your business assets and income.1 Small-business insurance protects your business from unexpected financial losses that could threaten operations or even force you to close.
Business insurance may also be a requirement in some cases. For example, landlords often require businesses to purchase renters insurance when signing a lease, and most states require business owners to carry workers’ compensation insurance.
Beyond practical uses, business insurance policies also provide valuable peace of mind. The policy can help limit your out-of-pocket costs and keep the business running after a covered peril.
You can typically mix and match business insurance policies to fit your needs. Common business insurance policies include:
General liability insurance protects your business against financial losses as a result of an injury, property damage, medical expenses, libel, slander, lawsuit defense, court judgments, or settlement bonds.
This coverage applies when your business is liable for injuries or damage on the premises, away from the premises, or as a result of defective work, defective goods, or improper warnings. For instance, if a customer breaks their arm while visiting your business, this policy can pay their medical bills.2
Professional liability insurance protects you from financial losses arising from situations such as fraud, malpractice, conflict of interest, errors, or negligence. For example, this type of policy can protect you if you provide massage services and a client sues you over alleged skin damage.
A business owners policy bundles several types of coverage into one policy, which simplifies the insurance-buying process and typically helps you save money. A BOP usually includes general liability, commercial property/business property coverage, and business interruption insurance. You may also have the option to add coverages as needed.
Commercial property insurance protects your business’s physical assets — such as buildings, equipment, furniture, and inventory — if a covered peril damages those assets. Covered perils may include fire, smoke, hailstorms, windstorms, and vandalism. A business owners policy usually includes this type of coverage.
Workers’ compensation insurance pays for an employee’s medical costs and lost wages if they’re injured at work. For example, this coverage might kick in after a worker breaks their wrist by slipping and falling in an office.
Commercial auto insurance protects vehicles that you use for commercial purposes.3 For example, a construction company may own a fleet of trucks to transport tools and crew members to job sites. Nearly every state requires vehicle-owning businesses to carry coverage that at least meets the state’s minimum requirements.
Cyber liability insurance protects your business against financial losses resulting from a cyberattack. For instance, a retail ecommerce business might benefit from this type of policy if hackers gain access to their customer data.
Business interruption insurance covers lost revenue and pays for extra expenses if business operations are interrupted. Companies that have 100 or fewer employees and revenues of up to $5 million are eligible for these plans.
A commercial umbrella insurance policy extends your liability limits to provide extra protection. For example, if you have $2 million in liability coverage from a BOP, but a client sues your business for $2.5 million, the umbrella policy would cover the $500,000 shortfall.
Business insurance helps cover many risks, but it doesn’t cover everything. Here are a few common exclusions to watch out for:
Intentional acts: If a business owner or employee causes damage on purpose, insurance won’t pay for it.
Employee fraud or theft: Most standard policies exclude losses from internal theft unless you add crime coverage.
Wear and tear: Business insurance typically doesn’t cover damage from normal aging or poor maintenance. It’s up to you to keep your work equipment in good shape.
Contract disputes: If a client claims you didn’t fulfill the terms of your contract, that’s a legal matter, not an insurance claim.
Nuclear events or war: Business policies almost always exclude extreme events, such as war or radiation-related damage.
The cost of small business insurance depends on factors like the policies you need, where the business is, your industry risk level, your chosen policy limits and deductibles, and the number of employees you have.
Most small businesses need at least a business owners policy, which has commercial liability and property coverage. These policies cost less than $100 per month, on average.
You have three main options for where to buy business insurance:
You may be able to buy a business insurance policy in about a day if you have your information ready. Here are the steps you’ll take:
Consider your risks. What kind of accidents, natural disasters, lawsuits, and other hazards could damage your business? Identify these based on the type of business you operate, the assets you own, and your exposure to liability.
Look for legal requirements. Have a legal consultation or check your state’s insurance website to see which insurance policies are required for your business.
List your assets, payroll, and revenue. This helps determine how much coverage you need for property, employees, and loss of income.
Gather your business’s prior claims history. Insurers often request your “loss run report,” which lists your claims history, to assess your risk profile and pricing. You can get the report from your current or previous insurer or your state’s insurance department.
Identify key roles. List people, operations, and equipment you can’t operate without. This ensures you include business interruption coverage or key person insurance if needed.
Get online quotes. Coverage options, deductibles, and prices vary by insurance company, so it pays to shop around. Gather quotes from at least three insurance companies.
Talk to a broker for specialty coverage. A broker can find policies tailored to niche industries or high-risk businesses.
Evaluate the policy. Look through your coverage limits and deductibles to ensure they’re high enough to protect you but affordable in case of a claim. Review exclusions and policy terms to understand what the policy doesn’t cover and avoid surprises later.
Purchase and request a certificate of insurance. You may need this for contracts, leases, or client work.
Set renewal and audit reminders. Annual reviews ensure your coverage still fits your business’s size, revenue, and risks.
The cheapest policy isn’t always the best one — especially if it leaves you exposed to your biggest risks. Focus on coverage that fits your business, not just your budget.
You can consider:
The top risks in your industry and location
Required coverage for contracts or compliance
Your business assets, revenue, and payroll
Policy limits and deductibles you can afford
Exclusions that could leave you vulnerable
The insurer’s reputation for claims handling
Choosing the right policy means balancing cost with the protection your business truly needs.
If you still have more questions surrounding business insurance, the following answers may help.
In some cases, yes, business insurance is legally required. Small businesses with employees usually have state-specific coverage requirements, like workers’ compensation, while businesses that use company vehicles must buy commercial auto insurance. Your needs depend on your location, your industry, and how your business operates.
It depends on your policy. Many homeowners or renters insurance policies offer limited coverage for business equipment — often capped at $2,500 or less for items used at home. If you run a business from home and have expensive gear, you may need home-based business insurance to make sure you fully protect everything.
Small businesses typically start with a business owners policy, which includes commercial general liability and property damage insurance. You may buy other types of business insurance policies or customize your BOP to fit your needs. The Small Business Administration (SBA) recommends buying business insurance for losses you wouldn’t be able to pay for on your own.
LLC insurance usually refers to a business owners policy, which combines business property and liability insurance with optional add-ons, such as commercial auto insurance and workers’ compensation insurance. These policies typically cost less than $100 per month before the add-ons.
Business insurance is always worth the expense if it’s required by law or a business associate, such as a landlord, client, or licensing organization. Even when not required, these policies can be worthwhile because they help protect you against financial losses that could disrupt operations.
For most startups, basic business insurance like general liability costs $400 to $750 per year, while a bundled business owners policy typically runs $600 to $1,200 annually. Specialized coverage — such as professional liability or cyber insurance — can add several hundred to a few thousand dollars more, depending on your industry and risks.
At Insurify, our goal is to help customers compare insurance products and find the best policy for them. We strive to provide open, honest, and unbiased information about the insurance products and services we review. Our hard-working team of data analysts, insurance experts, insurance agents, editors and writers, has put in thousands of hours of research to create the content found on our site.
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