Author: Kimberlee | April 9, 2025
Edited by: Kimberlee and Reviewed: Kimberlee
If you’re a small business owner, you need to assess your business insurance needs and look at getting one or more insurance policies. Knowing what policies to get can be a bit overwhelming if you aren’t looking at the risks you face. For the most part, a business will need a general liability insurance policy and a workers’ compensation insurance policy at the very least. This covers third parties and employees, protecting the business from common claims.
Small businesses face risks that they can try to mitigate but might not be able to avoid altogether. If they had to pay claims out of pocket, they would be faced with tens of thousands, if not more, in costs that may be medical bills, lost wages, and other settlement costs or judgements. This would be a financial strain on most businesses. This is where small business insurance comes in. It pays the claims so that the business can focus on making more money. In some cases, business insurance is required by law or by contract, but most are electives that business owners should consider to avoid big costs.
Insurance companies have developed a policy for just about every type of risk. Read through the list and work with your insurance company to determine which of these policies best fits your risk needs.
You may need a general liability insurance policy if you have a lease contract where you are required to absolve the landlord of risk and also must insure the rented property. This pays for injuries or property damage to third parties who may have an accident on the property. Slip-and-fall accidents are the most common example of this type of claim.
A business owner’s policy is a combination policy that combines general liability with commercial property. Insurance companies may also include business interruption insurance with this policy. This is a cost-effective alternative if you need two or more of these policies to cover your business needs. A business owner’s policy is often less expensive than getting two separate policies.
If you are a professional service provider, you may need a professional liability insurance policy because you are at risk of clients saying that you didn’t do your job professionally, that resulted in a financial loss to the client. Professional liability is also called errors and omissions or malpractice insurance.
Workers’ compensation is required by law in most states where you have at least one employee. Texas is the only state that doesn’t require it, and some states have a higher employee threshold before the requirement kicks in. This pays for medical expenses and lost wages of employees hurt on the job. Employees lost the right to sue you if you have workers’ compensation insurance.
Commercial property insurance protects your belongings. You should consider getting this policy if you have a lot of things that are required for operations, such as business furniture, computers, equipment, supplies, and inventory. It is also known as hazard insurance.
Commercial auto insurance is required for small businesses that have work or delivery vehicles. The state requires registered vehicles to maintain insurance, and if it is a work vehicle, personal auto insurance won’t protect it. It pays the liability if your driver hits another vehicle or property. It can also pay to repair your vehicle if you elect that coverage.
If you want your business to be able to pay expenses even when it is out of operation due to a claim, you want to get business interruption insurance. This policy is often part of a business owner’s policy, so double-check with your insurance company to see if it is included or if you need a separate policy.
For companies that collect and store customer data, a cyber liability insurance policy is a must. It is also important for companies whose operations rely on online websites and portals. This insurance pays claims when there are data breaches or a hostile takeover of your site for ransom. Fines can be massive, so this policy is imperative to maintaining free cash flow.
If you sell products to the general public, you may need product liability insurance. If someone gets hurt from your product, you are liable for their injuries. This policy pays for the medical costs. Some general liability policies contain product liability, so ask your insurance company if you need it.
Disability insurance is a benefit paid by employers for employees who get hurt and are unable to work. Disability insurance pays a portion of wages so that the employee still has an income while out on disability.
You may need key person insurance if you have employees who are critical to the company’s success. Often, this is a CEO or key manager. The company would get key person insurance, which is a life insurance policy that pays upon the key person’s death to offset the loss of income and facilitate getting a replacement.
If you’re a non-profit or company with a board of directors, you need to consider getting directors’ and officers’ insurance. This pays claims when your directors or officers are sued in their official capacity. It pays legal fees, settlement, and judgment costs. This is to protect your people working in an official capacity.
Similar to commercial property insurance, tools and equipment coverage protects a contractor’s tools and equipment from damage or theft. What makes it different from commercial property is that commercial property doesn’t cover things in transit, whereas tools and equipment coverage does.
When choosing an insurance policy, consider the risks your business faces. Think about the likelihood of a claim. In fact, talking to others in your industry can help you better understand if your company is at risk for a claim. Get quotes and compare them among insurance providers to get the best price possible. A good insurance agent or broker can help you determine if you need a particular policy and will help you get the best insurance at a competitive price.
Policy Ape is a great resource to finding the right type of insurance for your business needs. Use our connect-to-carrier tool to find a carrier that has the appetite for your industry and is willing to write the policy for a competitive price.
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