Types Of Small Business Insurance (2024)

Starting a new business is an exciting time and you’ll want to choose the best types of small business insurance policies to keep your company safe from the potential costs of claims, damages and lawsuits. Here’s a roundup of important small business insurance policies.

Here are the types of insurance a small business may consider:

1. Business Liability Insurance
2. Commercial Property Insurance
3. Business Interruption Insurance
4. A Business Owners Policy
5. Commercial Auto Insurance
6. Cyber Liability Insurance
7. Errors and Omissions Insurance
8. Technology Errors and Omissions Coverage
9. Commercial Umbrella Insurance
10. Workers Compensation Insurance
11. Other Types of Small Business Insurance

Business Liability Insurance

General liability insurance protects a small business from claims of property damage and bodily injury. As a small business owner, you may be legally responsible if a person’s property gets damaged while visiting your business, company or store. And if your business is responsible for someone’s injuries (not including an employee’s injuries), general liability insurance would pay for their medical bills and lost wages too.

Other claims handled by general liability insurance include reputational harm, advertising injury and copyright infringement.

With the help of a business liability insurance policy, your small business will be able to maintain financial stability if you should get sued by a customer or other business. A general liability policy also pays for your legal costs, along with settlements and judgments.

Financial lenders, landlords, licensing boards and business clients often require general liability insurance before doing business. So there are many reasons to put commercial general liability insurance at the top of your insurance to-do list. A general liability insurance certificate will show that you’re properly insured.

A general liability insurance policy costs an average of $42 per month, according to Insureon.

Commercial Property Insurance

A commercial property insurance policy protects the physical location of your small business and your business equipment, computers and office furniture. Owned and leased business equipment are both covered by this policy.

It takes a lot to make a small business go and there is a lot covered with a commercial property insurance policy. Tools, inventory, supplies, valuable papers and business records are all covered. Commercial property insurance also covers outdoor fixtures such as signs and fences.

A commercial property insurance policy typically applies to any loss to your small business property due to perils such as lightning, wind, hail and fire. Commercial property insurance also covers theft and acts of vandalism.

A commercial property insurance policy has a median cost of $63 per month, according to Insureon.

Business Interruption Insurance

A business interruption insurance policy replaces lost income from a small business if you need to temporarily shut down due to a loss covered by the policy, such as a lightning strike or a fire. Other perils covered by business interruption insurance include theft, wind and falling objects.

If any of these problems strike your small business, business interruption insurance pays for money lost because of damaged merchandise, lost earnings and additional expenses such as having to move the business to a new location on a temporary basis.

This is also called business income insurance.

Business interruption insurance costs between $40 and $130 a month, according to Insureon.

A Business Owners Policy

A business owners policy (BOP) bundles general liability insurance, commercial property insurance and business interruption insurance together. It’s an affordable way to buy small business insurance. Buying the policies separately will mean higher prices.

Just how affordable is a BOP? It costs an average of $53 per month, according to Insureon.

Companies with 100 employees or fewer and revenues of up to about $5 million are good candidates for a BOP, according to the Insurance Information Institute.

Commercial Auto Insurance

Commercial auto insurance is needed for the cars, trucks and vans used for your small business.
A personal auto insurance policy typically excludes any business uses of a vehicle. That’s why it’s so important to get a commercial auto insurance policy if you have a company car, truck or van that you use for business purposes.

If you fail to get business auto insurance for work vehicles, any claims you make could be denied. You would end up paying for any accident and other damage all on your own, which could get very expensive.

Commercial auto insurance costs a median of $142 per month, according to Insureon.

Hired and non-owned auto liability insurance provides liability coverage should employees rent or use their personal cars for business purposes.

Because any driving you do for business won’t be covered by a personal insurance policy, it is essential to buy a hired non-owned auto liability insurance if you’re renting a car for work or driving your own car for work purposes. Doing so will give you the insurance coverage that you need and save you from a hefty insurance claim should you be at fault in an accident while driving for business.

Cyber Liability Insurance

A cyber liability insurance policy helps with the costs of cyberattacks and data breaches. Let’s say some private customer information gets leaked from your company’s database. If the customer files a claim against your company, cyber liability insurance will help pay for the costs. Cyber liability insurance also will help pay for things such as notifying customers impacted by a data breach and offering them free credit monitoring.

The median cost of cyber liability insurance is $140 per month for small businesses, according to Insureon.

Errors and Omissions Insurance

If your small business provides a professional service or offers advice to clients, it’s a good candidate for errors and omissions insurance.

Errors and omissions (E&O) insurance pays for costs resulting from mistakes that you make in your work. This insurance is also known as professional liability insurance.

Errors and omissions insurance will pay out to customers who make a claim against your small business. These types of mistakes include misrepresentation, violation of good faith and fair dealing, negligence and giving false or inaccurate advice.

It also pays for legal defense costs, judgments and settlements.

Without E&O insurance, you’ll be on the hook for reimbursing customers out of your own pocket and paying for a lawyer.

What types of small businesses would benefit from errors and omissions insurance coverage? Here are a few examples:

• Accountants
• Advertising agencies
• Graphic designers
• Interior decorators
• Management and business consultants
• Real estate agents
• Tax preparers
• Technology professionals
• Travel agents

The median cost of errors and omissions insurance is $59 per month, according to Insureon.

Technology Errors and Omissions Coverage

If you work in the technology field, you may be able to purchase an errors and omissions policy specifically for your type of work. Technology errors and omission insurance pays legal and other costs from claims made by customers against a small technology business.

Types of small business technology professionals that could benefit include:

• Computer consultants
• Internet service providers
• IT contractors
• Software developers
• Website developers

The median cost of technology errors and omissions insurance is about $60 per month, according to Insureon.

Commercial Umbrella Insurance

Commercial umbrella insurance offers an extra layer of protection above the other liability insurance policies of your small business. Once you reach your liability limit on an underlying insurance policy, commercial umbrella insurance will provide additional liability protection.

You can use a commercial umbrella policy with a general liability policy and a commercial auto policy.

Let’s say your company is sued for $1.2 million but you have only $500,000 in a business liability policy. Commercial umbrella insurance would cover the $700,000 shortfall.

How much coverage you choose and the level of risk of your business determines how much you’ll pay for an umbrella policy.

Commercial umbrella insurance costs about $40 per month for each $1 million of additional insurance coverage, according to Insureon.

Workers Compensation Insurance

If you have even one employee for your small business, you’ll have to sign up for workers compensation insurance. Workers comp pays for work-related illnesses and injuries for your employees and it’s required in most states. This insurance covers medical care, lost wages and disability benefits for employees.

Small business customers pay a median premium of $47 per month for workers compensation insurance, according to Insureon.

Other Types of Small Business Insurance

Here are some additional types of insurance that you may need for a small business.

Directors and officers (D&O) insurance. This type of liability insurance policy covers the decisions made by directors and officers and board members of a company. If they’re sued, can pay for their legal expenses. For example, directors and officers could be sued by employees, vendors, investors or customers for alleged wrongdoing in managing the company.

Inland marine insurance. Inland marine insurance covers products and materials and equipment that are being transported on land by truck or by train. It will pay for property that has been damaged, lost or stolen.

Product liability insurance. Product liability insurance covers claims and lawsuits that a company’s products caused injury or property damage. If you make a product, this is a good insurance safeguard to have.

Builder’s risk insurance. Builder’s risk insurance, also called “course of construction insurance,” provides property coverage for buildings and structures that are under construction.