Small business insurance coverage are policies that protect a business and its assets against claims—such as fire, theft, customer slip and fall, workers’ compensation, professional errors, and data breaches. It can be a single policy, such as general liability, or a combination of policies, such a business owner’s policy (BOP), commercial auto, and workers’ compensation.
Small business insurance costs vary—a general liability policy can range from $350 to $1,932 annually while a BOP can run from $510 to $3,960 annually. Depending on your industry and if you have employees, you may be required to purchase workers’ compensation and general liability.
Simply Business is an online insurance broker that can help you find business insurance coverage at an affordable price from the 16 top-rated small business carriers it works with. In 10 minutes or less, you can compare quotes and purchase a policy online. While agents are available, its intuitive system makes it possible to go through the purchasing policy without needing to speak to anyone.
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Who Needs Small Business Insurance?
Anyone who has a business, be it full- or part-time, needs to consider business insurance coverage. Whether you are a freelancer, a home-based business, a brick-and-mortar business, or an ecommerce retailer, business insurance is a needed protection.
Some forms of insurance, such as workers’ compensation, are required in nearly every state. In other situations, renting a building or having a booth at a craft show will require proof of general liability insurance.
Common Insurance Coverage for Small Business
Beyond general liability and workers’ comp, there are other policies you can purchase. Some of these are specialized, such as key person insurance and premises liability. The wide range of policies is designed to fit your specific business needs.
Common Type of Insurance | What It Covers |
|---|---|
General Liability | Nonemployee claims of bodily injury, property damage, and reputational harm |
Commercial Property | Damage to business-owned property, including buildings and their contents |
BOP | Combines commercial general liability and property coverages |
Professional Liability | Clients’ accusations of financial losses due to your negligence, mistakes, or omissions |
Commercial Auto | Costs associated with accidents involving vehicles owned or used by your business |
Workers’ Compensation | Employees’ medical bills and lost wages resulting from a work-related injury |
Commercial general liability (CGL) insurance, or general liability, protects your business from incidents for which you are legally liable. These include bodily injury, property damage, and reputational harm. General liability covers some of the most basic and common risks a business faces in operations and is one of the most important business policies you can purchase.
It can be expensive, so finding an affordable provider for general liability is so important—and you can check our roundup of the cheapest general liability insurance companies for options. For more carriers, read our guide to the best general liability insurance companies. It includes our recommendations for specific use cases.
While liability protects your business by covering third-party damage, commercial property covers your business’s physical assets, including your building, contents, and furniture. Property policies usually have named perils, such as fire or theft, so you have a pretty good idea of what qualifies as a covered loss.
Coverage is usually set with a predetermined limit and a deductible, which is the amount of the claim you are responsible for handling. There are typically options for the deductible and limit. Our evaluation of the top commercial property insurance companies can be a good place to start. Each recommendation indicates our recommended target users.
Many providers offer a BOP, which combines general liability and commercial property. The advantage of combining the policies is twofold: all of your policy information is centralized, and many carriers will provide a discount when bundling the coverages. Most BOPs also include business interruption or business income coverage, which pays your business for lost profits and ongoing expenses when a qualified loss pauses your operations.
Commonly called errors and omissions (E&O), professional liability helps your business if a client claims they experienced a financial loss due to your service. This can range from allegations that you made a mistake, offered inaccurate advice, failed to deliver on promised service, or were otherwise negligent in the performance of your service.
Many professional services, such as accountants, purchase this insurance if it doesn’t come as part of their general liability. Check out our guide on the leading professional liability insurance companies to find a provider that fits the bill.
If your business has vehicles, or employees who regularly use their vehicles for business purposes, then you will want to look into commercial auto insurance. Most states require auto policies to carry liability insurance, and if you choose additional coverage like collision, this coverage can help pay to repair vehicles and other damages caused by them.
There are many options for commercial insurance. To save time, review our list of the top-recommended commercial auto insurance companies.
Required in nearly every state, sometimes for businesses with even only one employee, workers’ compensation insurance pays for employees’ medical bills and lost wages if they suffer a work-related injury or illness. Depending on the policy, it may also cover your legal defense if the injured employee claims your business was negligent.
Workers’ comp providers offer different services to help your employees return to work, which is why it is important to learn as much as you can before you buy a policy. View our list of the best workers’ compensation companies to find one that fits your needs.
Small Business Insurance Costs
Insurance costs for small businesses have a wide range. In our research, we obtained multiple sample quotes to calculate the average price for small business insurance.
Policy Type | Coverage Amount | Estimated Premium |
|---|---|---|
General Liability | $1 million per occurrence $2 million aggregate | $350 to $1,932 annually |
BOP | $50,000 in property $1 million per occurrence $2 million aggregate | $510 to $3,960 annually with a $1,000 deductible |
Professional Liability | $1 million total liability | $840 to $1,750 annually |
Commercial Auto | $300,000 combined single liability limit | $3,840 to $4,200 annually with a $1,000 deductible |
Commercial Umbrella | $1 million | $6,000 annually |
A commercial umbrella policy is an excess policy that can be purchased for additional limits. If the limits on the initial policy are exhausted, then the umbrella policy can then be utilized. While this is not always a necessary coverage, it can be appropriate for some higher-risk industries.
When determining cost, carriers will usually factor in some of the following data:
- Risk: What is the level of risk for your industry?
- Claims: Does your business have a history of filing claims?
- Employees: How many people work for your company?
- Training: What type of training do your employees have?
- Screening: Do you perform background checks on your employees?
- Revenue and payroll: What was your revenue for the last 12 months and expected payroll?
- Business structure: Is your business a limited liability company (LLC), sole proprietorship, or something else?
- Geography: The location of a business can impact premiums because of the cost of a natural disaster.
Be sure to answer these questions honestly as it helps the provider get an accurate picture of what level of coverage and type of policy you need.
Insurance by Industry
The types of business insurance coverage for small businesses fluctuates based on the industry. However, as you’ll see, there are some core policies that nearly every type of business should consider.
Painting
If you paint homes, you should consider general liability, commercial auto, and workers’ comp. If you have expensive equipment, then you will also want to look at the inland marine. Many providers will offer inland marine as an endorsement with general liability.
We’ve compiled a list of the leading painting insurance companies to help you find one that suits your specific needs.
Handyperson
Handypersons should consider a general liability. If you own an office, then a BOP would better meet your business needs but, if you work from home, consider inland marine for your tools and equipment. If you have a dedicated vehicle, you will need commercial auto, and if your business employs anyone, you will most likely need workers’ comp.
Our guide to the best handyperson insurance companies can help you find a provider that fits the bill.
Gym
Trainers, personal fitness instructors, and gym owners all need general liability. However, professional liability is an important gym insurance policy if you employ any instructors at your gym. If you own or rent a building, you will want property insurance—and even workers comp’ for your employees.
Cleaning Business
Janitors and residential and commercial cleaners need general liability insurance. Depending on the type of work you do, such as floor waxing, you will also need a property policy for your tools and equipment and workers’ comp if you have any employees. If you own work vans that transport employees and equipment, then you will also need commercial auto. Find out more about it in our in-depth guide to cleaning business insurance.
Rental Property
Rental property insurance protects a landlord’s property from damage and loss of income and offers liability coverage. Its cost varies depending on amenities and the location of the property. However, it is important to note that a standard homeowner’s policy will not be sufficient if you regularly rent your home out utilizing an Airbnb or Vrbo service. For a $200,000 property, you can expect to pay anywhere from $1,200 to $2,400 annually.
If you’re looking for landlord insurance, check out our rundown on the best landlord insurance companies.
Ecommerce
If your business is primarily online, you’ll want to purchase ecommerce insurance. A good policy provides liability and property protection and has some form of cyber liability insurance coverage. If you sell on Amazon, you’ll want to make sure you have a policy that is in line with Amazon’s seller rules. Check out our top-recommended ecommerce insurance companies for providers.
Accounting
Bookkeepers, certified public accountants (CPAs), and other professionals, such as tax preparers, need to consider professional liability insurance. Its primary point is to provide your business with coverage, in the event that another party claims they suffered financial harm as a result of a mistake you or your employee made. Learn more about this type of insurance, such as what it covers and how much it costs, in our guide on CPA and accounting insurance.
How To Get Small Business Insurance Coverage
Insurance for small businesses is available through a variety of means: online, mobile apps, and in-person meetings with agents or brokers. When shopping for insurance, be prepared to answer all questions about your business honestly so that the carrier can determine what coverage is best.
When looking for a small business insurance company, you’ll want to consider what is most important to you. Might it be its timely response to questions, or perhaps minimal complaints filed against the company? Whatever is crucial, make sure to ask about that and any concerns you have during the quoting process.
A broker works with multiple carriers to help a small business get insurance. To find the best brokers, consider one that works with multiple carriers with A-ratings from crediting organizations like AM Best. Also, find out what support services it offers: does it help with claims, do you have 24/7 access to your policy, and what is the process for generating a certificate of liability?
Brokers allow you to compare quotes from top providers—which is one of our top tips to save money on business insurance. By allowing you to do so in real time and even make adjustments to coverage before purchasing, you can find the right type of insurance at a great price. Check out our guide to the best business insurance brokers to learn more.
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Frequently Asked Questions (FAQs)
It is any type of insurance a small business owner buys to protect their property and business against liability. It can be a standalone general liability insurance policy, a combination of policies like a business owner’s policy, or something more niche like special event insurance.
Nearly every state requires a business with one employee to carry workers’ comp insurance. Beyond that, it depends on the industry and any specific boards that may govern it. For example, most states require heating, ventilation, and air conditioning (HVAC)-licensed technicians to have general liability or a bond.
If you have any employees, even one, then check state regulations to see if you are required to carry workers’ comp. From there, it depends on the type of business: general liability is a good idea for nearly every type of business, professional liability is a necessary coverage for businesses in the service industry, and either commercial property or inland marine if you own property, depending on what type of property it is.
Cost varies by industry and level of coverage selected. An average general liability policy can run from $350 to over $1,000 yearly. A commercial auto policy will be at least several thousand for one vehicle. When considering the cost, think about the value of being uninsured when you suffer a loss.
There are short- and long-term solutions to lowering your premium. For the short-term, things like adjusting your limits and lowering your deductible should result in some decrease in your premium. You can also ensure you aren’t paying for unnecessary coverage by reviewing your insurance with your agent. Many insurers will offer multi-policy discounts if you purchase insurance exclusively through them, and bundling coverage, such as through a BOP, will usually result in some savings. For the long-term, maintain a safe work environment and manage risk to eliminate the chance of filing a claim.
While there may be very limited coverage in certain situations, the odds are high that your personal policy will not cover any business activities. Most personal policies—such as homeowner and auto—have coverage exclusions for business-related activities.
There are three ways to purchase insurance: directly through a provider, by utilizing a local agent, or by going through a broker. This can be done online, in person, or over the phone.
Bottom Line
Owning a business comes with risks—and the cost of responding to those risks is great enough that it can jeopardize your business. Small business insurance coverage is any policy that you purchase to guard against risk, and the policies you buy protect your business by handling injury costs, legal fees, property damage, and other named perils so that you can continue to operate your business.
If you’re looking for quality insurance, we recommend Simply Business. After answering questions about your business, it will generate multiple free quotes, letting you compare the costs and policies available for your business.
