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.
Featured Partner Offers
1
Simply Business
Save time, save money and secure your business effortlessly
2
Next Insurance
Tailored policies for thousands of professions
A- (Excellent)
Choosing the Right Business Insurance: A Comparison of Options
| Type of business insurance policy | What does it cover? | What does it cost per month? |
|---|---|---|
| Claims against you for property damage and bodily injury. Also called general liability insurance. | $42 | |
| Damage, theft or vandalism of your business location, equipment, computers, office furniture and outdoor fixtures. | $67 | |
| Lost income if you must close temporarily due to a loss covered by your policy. | $40 to $130 | |
| Combines general liability, commercial property and business interruption insurance. | $57 | |
| Vehicles used for your business. | $147 | |
| Costs associated with recovering from cyberattacks and data breaches. | $145 | |
| Costs resulting from mistakes in your work, whether the claim has merit or not. | $61 | |
| Costs resulting from mistakes made in a small technology business, whether the claim has merit or not. | $67 | |
| Additional liability beyond your other liability insurance policies. | $75 | |
| Work-related illnesses and injuries for your employees, including medical care, lost wages and disability benefits. | $45 |
Business Liability Insurance
General liability insurance pays out to others when you’re responsible for accidental property damage or injury. As a small business owner, you may be legally responsible if a person’s property gets damaged at your business or away from it. 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. Liability insurance also pays your legal costs if someone sues you over these matters.
Other claims handled by general liability insurance include:
- Reputational harm
- Advertising injury
- 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 a commercial property insurance policy covers a lot, such as:
- Tools
- Inventory
- Supplies
- Valuable papers and business records
- 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.
Commercial property insurance costs a median of $67 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 things like:
- The revenue your business would make if it were open
- Monthly mortgage, lease and rent payments for the business space
- Loan payments for the business
- Taxes
- Payroll
- Relocation costs if you have to move to a temporary location
- Training costs for employees to learn new equipment
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 $57 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.
- Property damage liability
- Bodily injury liability
- Combined single limit (CSL)
- Collision insurance
- Comprehensive insurance
- Medical payments and personal injury protection (PIP)
- Uninsured motorist coverage pays for your and your passengers’ injuries if your vehicle is struck by an uninsured driver.
A personal auto insurance policy typically excludes any business uses of a vehicle. 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 $147 per month, according to Insureon.
Because a personal insurance policy won’t cover business-related driving, consider buying non-owner auto liability insurance if you’re renting vehicles for work.
Cyber Liability Insurance
A cyber liability insurance policy pays the costs of recovering from a cyberattack or data breach. 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 will also help pay for things such as notifying customers impacted by a data breach and offering them free credit monitoring.
These are common expenses cyber liability helps to cover:
- Customer and employee lawsuits due to privacy breaches.
- Lost income because of network outages.
- Public relations costs to restore your company’s reputation after a data breach.
- Ransom payments you have to make to get back your data access.
- Regulatory fines.
The median cost of cyber liability insurance is $145 per month for small businesses, according to Insureon.
Featured Partner Offers
1
Simply Business
Save time, save money and secure your business effortlessly
2
Next Insurance
Tailored policies for thousands of professions
A- (Excellent)
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
- 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 $61 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 $67 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.
Commercial umbrella insurance covers expenses such as:
- Medical bills of others
- Damage to someone else’s property
- Your legal costs
- Court judgments and settlements
You can use a commercial umbrella policy with a general liability policy and a commercial auto policy.
Suppose 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.
Commercial umbrella insurance costs about $75 per month, 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 $45 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, officers and board members of a company. If they’re sued, D&O insurance 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, materials and equipment transported on land by truck or 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.
Builder’s risk insurance. Builder’s risk insurance, also called “course of construction insurance,” provides property coverage for buildings and structures under construction.
Business Insurance Made Simple
Compare Free Quotes From Top Insurers at Simply Business. Get a Policy in Under 10 Minutes.
Types of Small Business Insurance Frequently Asked Questions (FAQs)
What is the best type of insurance for a small business?
The insurance coverage that will be best for your small business depends on the specifics of your business and its risks. A business owners policy (BOP) is a good place to start with three essential coverage types: general liability insurance, commercial property insurance and business interruption insurance.
How many types of commercial insurance are there?
There are at least 14 different types of commercial insurance.
